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Weakening Wednesday – We Are Loving Our CASH!!!

Don't say I didn't tell you so…

If you don't cash out when the markets are making silly highs then you end up having to scramble like an idiot to cash out when everyone is panicking and you get MUCH WORSE PRICES for your stocks and options.  The same thing goes with hedging – as it's MUCH CHEAPER to hedge when the market is going up and no one thinks it's going to fall.  You have to have a bit of contrarian in you if you want to learn to be a good investor, following the herd all the time just makes you one of the sheeple.  

The wolves who read yesterday's PSW Morning Report not only picked up the $2,000 per contract-winning Nasdaq (/NQ) short but also $500 per contract gains on the Oil (/CL) and $500 per contract on the S&P (/ES) (and, if you'd like to get these trade ideas pre-market, you can SUBSCRIBE HERE) based on these very simple instructions:

Since the Dollar has been holding things up, today is a good day to short Oil Futures (/CL) at $72.50 for a quick dip but get out before the API report this evening.  We're just looking for a quick win with VERY TIGHT STOPS above the $72.50 line.  The whole key to trading the Futures is having a good backstop so you can limit your losses.  6,950 on the Nasdaq (/NQ) is also a good line and 2,740 on the S&P (/ES) makes a good stop line with shorting below as we're at 2,738 this morning and it's my contention that 20 points of that is due to the Dollar so we'll look for at least a 10-point drop, to test the strong bounce line at 2,728 again – and that's up $500 per contract against the $100 risk at this level.

This morning, we're way down at 2,708 and that's a 30-point drop on the S&P at $50 per point, per contract so $1,500 gains if you stuck with that hedge overnight.  In addition to those pre-market plays, we also picked up shorts on the Russell (/TF) and we double-dipped on Oil (/CL) later in the session.  All in all, it was a great Tuesday and now an epic Wednesday for our Futures Trading and the great thing about Futures is you can get right back to CASH!!! and go get yourself a nice, relaxing breakfast without worrying about what the markets are doing.

Do you know how many times I said CASH!!! in the past two weeks?  Seventeen (17) times I said it was a good time to get back to CASH!!! (18) and walk away from this silly market.  I have said that my kids' college accounts are in CASH!!! (19) and even our Hedge Fund is 90% in CASH!! (20!) and, of course, we just did a review of our 5 Member Portfolios and, guess what – mostly cash!  (only one !, doesn't count).  

I can only tell you what the market is likely to do and beat your head in with the cash club telling you to protect your capital – the rest is up to you!  

Today's excuse for a sell-off is the off-again trade agreement with China and also the North Korea deal seems to be falling apart (along with Trump's Presidency) and, of course, Italy, the World's 9th largets economy ($1.9Tn) is imploding but MAINLY, it's the Dollar, which popped back to 94 against that macro mess and pushed the price of everything else lower – except Gold (/YG) which popped into the panic and Natural Gas (/NG), which could care less what the rest of the World is doing as the LNG Future is finally here (something else we've been banging the table on for ages).  

In fact, the Natuarl Gas ETF (UNG) was our Trade of the Year in 2016 but we cashed that out a month early in December, when it spiked back to our goal after a very disappointing fall – so we didn't want to risk the holidays.  Since then, we've been staying away from UNG but Chesapeak Energy (CHK) was a 2018 Trade of the Year Finalist back on Nov 28th, when they were down at $3.81.  We CASHED (doesn't count) out of our Portfolios in December but, in our new Member Portfolios this January, CHK was one of our first ads and, in our Options Opportunity Portfolio, the trade looks like this:

Long Call 2020 17-JAN 3.00 CALL [CHK @ $4.54 $0.00] 25 1/8/2018 (604) $4,500 $1.80 $0.43 n/a     $2.23 $-0.08 $1,075 23.9% $5,575
Short Call 2020 17-JAN 5.00 CALL [CHK @ $4.54 $0.00] -25 1/8/2018 (604) $-2,375 $0.95 $0.43     $1.38 $-0.06 $-1,063 -44.7% $-3,438
Short Put 2020 17-JAN 4.00 PUT [CHK @ $4.54 $0.00] -25 1/8/2018 (604) $-3,000 $1.20 $-0.20     $1.00 $0.06 $500 16.7% $-2,500

We're only up $512 from our net $875 credit entry (58%) but that's NOTHING as this spread will pay $5,000 if CHK is over $5 in Jan of 2020 so there's a potential additional $5,363 (1,477%) from the current $363 credit balance that you can make towards the cost of a PSW subscription on this trade idea if you'd like.  

Our other Trade of the Year finalists are all doing well.  They were Macy's (M), General Electric (GE), Cleveland Cliffs (CLF), Chipotle (CMG) and Hanes Brand (HBI), which took the place of our Limited Brands (LB) pick because LB had already taken off by November but now both of those retailers are cheap again with 20 months left to trade.  

Short Call 2020 17-JAN 23.00 CALL [HBI @ $18.23 $0.00] -10 3/15/2018 (604) $-2,100 $2.10 $-1.03 n/a     $1.08 $-0.05 $1,025 48.8% $-1,075
Short Put 2020 17-JAN 18.00 PUT [HBI @ $18.23 $0.00] -5 3/15/2018 (604) $-1,300 $2.60 $-0.05     $2.55 $-0.00 $25 1.9% $-1,275
Long Call 2020 17-JAN 15.00 CALL [HBI @ $18.23 $0.00] 10 5/1/2018 (604) $4,000 $4.00 $0.40     $4.40 $-0.07 $400 10.0% $4,400

All of those trade ideas, of course, found their way into our Member Portfolios – there's not one we don't have at the moment, which is why we're not in the least bit concerned about a little dip like this one.  Today's pullback is nothing and is as likely to be reversed this afternoon as it is to continue lower (depending on the Fed minutes).  Though we did not cash out our teaching portfolio, we do have them locked down with hedges and, in fact, our paired Long-Term ($500,000) and Short-Term ($100,000) Portfolios, which began the year at $600,000 and were at $773,776 (up 28.9%) as of Friday's close, closed yesterday at $786,773 – up another $12,997 (2.1%) for the week – as we are tilted slightly bearish and yesterday was a very good day for us.  

Image result for market sentiment cycleThat's how we can relax and have fun while the market stampedes the sheeple in and out of positions.  When you learn how to properly hedge your portfolio, you remain balanced as the market goes through it's gyrations and, because you have CASH!!! (21) when you need it – you are able to buy when things are cheap and sell when things get expensive.  THAT is how you learn to consistently win in the markets!  

By the way, notice how this market sentiment chart is exactly the same as this week's Dollar chart?  Interesting…

People are predictable so markets are predictable and, even more so, Robots are predictable and my Father wrote early versions of the trading programs the banks use to this day.  That's where our Fabulous 5% Rule™ comes from – my own observations of how the various "unique" trading programs tend to behave once they get out in the wild.  The more we have a bot-driven market (over 80% these days) the better our 5% Rule™ performs.   That's why we're able to tell you what the Futures are going to do before they do it and why we're so good at picking trading ranges.  

Of course, none of that is worth a damn if we don't pay attention to the underlying Fundaments but, fortunately, my Grandpa Max was a Warren Buffet style Fundamental Trader or, more accurately, Warren Buffett is a Max Davis style trader as Grandpa Max was making his first fortune selling dresses door to door in the Depression, at 27, by the time Buffett was born (1930).  I learned to invest on my Grandfather's lap and both of us were always dubious of these new-fangled trading computers my Dad was working on but, to me, they are just another predictable sheep we can stalk and exploit whenever we're hungry!  

As you know, we are still trading in the same predicted ranges we discussed last Tuesday (and dozens of Tuesdays before that!) and it's the NYSE that we need to watch closely as it will give us a very clear bull or bear indicator as it moves around the Must Hold line at 12,800 – which it failed yesterday (12,766). 

As I said last Tuesday:

If the NYSE is below 12,800, then bearish bets make the most sense and, when it's over, we can get a bit more hopefully bullish but the trend is not our friend the longer 12,800 acts as overhead resistance.  When the NYSE is lagging, it indicates the other indexes are not broadly rallying, which means those rallies can be very, very fragile.  Of course, if the Dollar keeps going up (global tensions), then commodities might collapse and that's been the NYSE and the S&Ps best sectors so – oops!  

Understanding these relationships and understanding the channels the indexes (and stocks) tend to move in is the key to making short-term money in the market.  Generally, we're long-term, Fundamental Investors and we don't really care about this nonsense but, while we are waiting for our long bets to pay off – we like to have fun betting against the suckers who think the market is about to make a new high – or a new low.  Usually, it doesn't so we place our bets on those lines with tight stops if they break and that keeps our risk low while our rewards can be very, very high.  See – easy!  

Easy!

 


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  1. Good morning, All!

    It's Wednesday! Join us for our weekly webinar at 1pm!

    https://attendee.gotowebinar.com/register/1509412152566231298



  2. They now have a market for soccer player:

    https://trade.footballindex.co.uk/


  3. Hurting their own base:

    https://talkingpointsmemo.com/dc/new-data-shows-republicans-health-care-self-own-is-taking-its-toll

    The analysts found that “the uninsured rate among adults who identify as Republicans jumped from 7.9 percent in 2016 to 13.9 percent in the first quarter of 2018. The uninsured rate among those who identify as Democrats, on the other hand, held steady at 9.1 percent over that same time period. Southern states, which are largely Republican-controlled, also showed a marked increase in their uninsured rates — from 16 percent in 2016 to over 20 percent in early 2018. These states had a higher uninsured rate than states in the Northeast, Midwest, and West.


  4. Good Morning.


  5. Good morning!  

    2,700 is still bouncy on /ES and we never quite hit it so call it 2,740 to 2,705 is 35 so weak bounce is 2,712 and strong is 2,719 this morning.

    Generally, we give the index as much time to make the strong bounce as it took to fall so end of day really or we consider it a failure.  Failure at the weak bounce line is always a bad thing. 

    Dollar should be rejected at 94 but also will it be strong or weak rejection.  93.45 is the 5% line from 89, which is where we were until April:

    So that's a 4.45 move and 20% of that is 0.9 so the overshoot is 94.25 and anything less than that is simply consolidation at the 5% line but, of course, anything over 93.45 is still bullish. 

    Meanwhile, in the smaller picture (5 min chart) it's the run from 93.20 to 94 of 0.8 so 0.16 retrace (weak) to 93.84 and stronger retrace takes us back to 93.68 so still bullish if we're over that and otherwise we'll see if 93.45 holds up.  

    Big Chart – All about the NYSE, /RTY is clearly the downside laggard if things turn ugly but more likely we'll claw back a bit first this morning.

    Players/StJ – Wow, if they had that when I was a kid, I probably would have done it my whole life.  I used to collect Baseball Cards and could tell you the lifetime statistics of pretty much every player as well as every hall of famer.  Football too.  If I could have gambled on it – that would have been the greatest!  

    Uninsured/StJ – Tragic but self-inflicted this time.  


  6. Good Morning.


  7. Good Morning…

    We had talked about IQ (Netflix of China) in previous posts.. just FYI to fellow PSW members – long dated options are now available.   


  8. guess we didn't have to wait to the afternoon for the market to recover… 


  9. EIA Petroleum Inventories: Crude +5.8M barrels   I guess "all other" was full this week


  10. IQ/Learner – $16Bn while losing $1Bn a year almost makes NFLX look attractive at $144Bn while making $500M.  NFLX has $12Bn in sales, IQ about $4Bn so if IQ made $12Bn, I bet they'd be profitable too but I doubt they are getting $10/month from Chinese people though I'm sure they can get content much cheaper….

    NFLX was doing $4Bn in 2013 and made $11M though.  IQ just IPO'd last month at $17 and already $23 after collecting $2.3Bn, which funds them for a couple of years.  They only have 60M subscribers out of 1.4Bn but, of course, that's probably 500M households, which would be the real number.  

    Metric

    Netflix

    iQIYI

    Subscribers

    119 million

    60 million

    Sales in 2017

    $11.7 billion

    $2.7 billion

    Sales Growth in 2017

    32%

    55%

    Market Cap

    $144 billion

    $13 billion

     

    From my brief check, it seems like they charge $3/month (20 Yuan), so of course they are popular.   That's the price of a Big Mac in China so they should be able to raise prices, the way NFLX did once people became addicted but, to make NFLX's revenues, they'll always need double the subscribers, so they are farther behind than you think.

    Still, the massive premiums on the 2020s make them interesting and I do like the 2020 $15 ($11.80)/$22.50 ($8.20) bull call spread for $3.60 as we can absolutely make all that money back by selling short calls.  It's going to be crazy, so let's put it in the STP and play and with it.  Our trade will be:

    • Buy 20 IQ 2020 $15 calls for $11.80 ($23,600) 
    • Sell 20 IQ 2020 $22.50 calls for $8.20 ($16,400) 
    • Sell 5 IQ July $22.50 calls for $3 ($1,500) 

    That's net $5,700 on the spread and we're using 58 out of 604 days to sell our first round.  If we have 10 more sales like that, we can sell $15,000 worth of calls just doing 1/4 sales (so little chance of getting blown out) while we wait to see if we collect $15,000 on the spread.  

    If they crash, we can consider selling puts but, for now, I don't trust crazy Chinese companies but this one did spin out of Bidu, so they're probably legit.  

    Recovery/Jabob – What matters is what sticks.  Yesterday's volume was super-low and I think the buyers are drying up so they can only make these desperate, low-volume pushes early in the day and then we sell back down.  

    Speaking of selling down – wheeee on oil and gasoline.  Huge build in inventories – as I predicted last week in the Webinar!  

    • EIA Petroleum Inventories: Crude +5.8M barrels vs. -1.6M consensus, -1.4M last week.
    • Gasoline +1.9M barrels vs. -1.4M consensus, -3.8M last week.
    • Distillates -1.0M barrels vs. -1.3M consensus, -0.1M last week.
    • Futures -0.24% to $72.03.

    Honey badger don't care, of course:


  11. I was ranting about how the oil and /RB move was all BS at the beginning of last week's webinar - it's good to see the logic I used to arrive at a shorting decision.  Our SCO trade idea was 

    Buy SCO June $15 calls for $1.50/Sell SCO June $17 calls for 0.50 for net $1 and we're right at $16 now so we'll see how it plays out.  The spread is still $1, so you can still play but now the $14s are $1.75 (and that triggers the roll we wanted to do for 0.45 to widen the spread to $14/17) and you can sell the $17 calls for 0.35 and that's how I'd go as a new play.


  12. Nikkei crashing on a strong Dollar – what are they going to do when it pulls back?  

    Meanwhile, harsh rejection at 23,000 is the story, but the big run is from 20,000 so 5% rule says 24,000 is the 20% line and that makes the retraces 800 points at 23,200 (weak) and 22,400 (strong) so we'll see if 22,400 has real support.  Bad if it doesn't.

     Euro Stocks 3,600 is the 20% line for them but you have to zoom out to weekly to see it.

    3,000 to 3,600 means 120-point retraces at 3,480 (weak) and 3,360 (strong) and now we can zoom in to see how it's going:

    That's a pretty crazy gyration, I'd expect to see 3,360 on this drop and that means we can expect our indexes to pull back as well.


  13. LB earnings tonight


  14. "There are not many Trump scandals. There is one Trump scandal. Singular: the corruption of the American government by the president and his associates, who are using their official power for personal and financial gain rather than for the welfare of the American people, and their attempts to shield that corruption from political consequences, public scrutiny, or legal accountability."

    https://www.theatlantic.com/politics/archive/2018/05/there-is-only-one-trump-scandal/560825/


  15. "These supporters will not change their minds, because this is what they always wanted: a president who embodies the rage they feel toward those they hate and fear, while reassuring them that that rage is nothing to be ashamed of."

    https://www.theatlantic.com/politics/archive/2017/11/the-nationalists-delusion/546356/


  16. IQ, Phil… thanks for the checks.  I have a spread on it already and I am waiting for it to pull back to sell puts.   I am with you on the risk of investing here, but as you pointed out, given they were a spin out from BIDU gives me some comfort to put some money to work here. 


  17. Scandals / BDC – The bigger scandal is the GOP Congress abdicating its responsibility to the American people! We knew about Trump, but we have discovered what kind of cowards these guys are.


  18. LB/Jabob – Finally!  

    • A large jump in margins at Ralph Lauren (RL +14.1%) is helping to lift share prices of other higher-end apparel sellers. RL saw its gross margin rate improve to 59.8% from 55.4% a year ago on a higher mix of full-price sales.
    • Early movers include Tapestry (NYSE:TPR+1.6%, Fossil (NASDAQ:FOSL+1.7%, PVH (NYSE:PVH+1.7%, G-III Apparel (NASDAQ:GIII+1.3% and Lululemon (NASDAQ:LULU+1.4%.
    • Previously: Ralph Lauren beats by $0.07, beats on revenue (May 23)
    • Previously: Ralph Lauren positive on earnings beat (May 23)

    Trump/BDC – This is just like Watergate, the shame of supporting this crook will crush the GOP for many years to come.  

    IQ/Learner – If they don't do well, there's very little chance we can't sell $5,700 worth of short calls over 2 years so not much risk being taken this way.

    • Stocks open lower and extend yesterday's late afternoon selloff, weighed by U.S.-China trade concerns and the ongoing situation with North Korea; Dow -0.4%, S&P and Nasdaq -0.3%.
    • Pres. Trump said yesterday that he was "not satisfied" with trade talks with China, contradicting comments from other members of his administration, and expressed doubt about his anticipated meeting with North Korea's Kim Jong Un.
    • "It's basically removing what we were given on Monday… of the U.S. and China agreeing on some format to solve the trade dispute," says Mark Luschini, chief investment strategist at Janney Montgomery Scott.
    • Major European markets trade lower across the board, with Germany's DAX -1.6%, France's CAC -1.4% and U.K.'s FTSE -0.9%; in Asia, Japan's Nikkei -1.2% and China's Shanghai Composite -1.4%.
    • In corporate news, Target -5.3%, Lowe's +8.7% and Tiffany +16% after reporting quarterly earnings.
    • Most S&P sectors are lower, with energy (-0.7%) leading the retreat as WTI crude futures -0.4%at $71.91/bbl, while the tech sector (-0.5%) also shows relative weakness.
    • U.S. Treasury prices have surged, sending the benchmark 10-year yield 4 bps lower to 3.02%, but the U.S. Dollar Index +0.5% despite the decline in yields, marking a fresh five-month high.
    • Traders will receive the FOMC minutes from the May meeting at 2 p.m. ET today; also still ahead are new home sales and EIA petroleum inventories.
    • Europe's having one of its worst days in weeks (the Stoxx 600 is down 1%), and S&P 500 futures are lower by 0.6%.
    • Among the easy excuses for selling: Amped up trade-war talk, and the idea that the Fed rate hike cycle is beginning to expose cracks in the goldilocks scenario.
    • Alongside the crumbling in Argentina's peso, we now have the Turkish lira plunging to an all-time low. Moving past emerging markets, the rout in Italian government paper has picked up steam, with 10-year BTP yields up nearly 12 basis points today to 2.44% – this as government bond yields in the rest of the developed world head sharply lower.
    • In the U.S., the 10-year Treasury yield earlier reached as low as 3%. Currently, it's off more than four basis points to 3.02%. TLT +0.7%TBT -1.4%

    • New home sales for April came in at a seasonally adjusted annualized rate of 662K, down 10K from March's pace (which itself was revised down by 22K), and missed expectations for 677K.
    • January and February sales were also revised lower, trimming 41K from the first quarter's new home sales. Still new home sales are on pace for 665K this year vs. 613K in 2017.
    • Rates, of course, have moved sharply higher, but the weather was particularly bad in April this year.
    • Looking at U.S. regions, sales in the Northeast, Midwest, and South were either up modestly, or flat. The West, however, saw sales drop to 176K from 191K.
    • Full report
    • The homebuilders (ITB +1%) are shrugging off the news.
    • Previously: New home sales lower in April (May 23)
    • May U.S. PMI Composite Flash55.7 vs. 54.8 consensus, 54.8 prior.
    • Services PMI 55.7 vs. 54.4 consensus, 54.4 prior.
    • Manufacturing PMI 56.6 vs. 56.5 consensus, 56.5 prior.

    • Margins are already cycle-high for advertising sector firms, and adding in growth that lags GDP makes a warning bell for the stocks, Morgan Stanley says.
    • The giants -- WPP, Publicis Groupe (OTCQX:PUBGY), Interpublic Group (NYSE:IPG) and Omnicom (NYSE:OMC) — look to be losing share in media spending, the firm says in a note. If the sector goes through a cyclical slowdown in 2019, then valuation multiples could re-test lows from late 2017, it says. (h/t Bloomberg)
    • WPP today is down 4.7%; Publicis is off 2.7%; Interpublic Group is 2.5% lower (but closer to its 52-week high than its 52-week low); Omnicom is 4% lower.
    • Previously: WSJ: Omnicom takes HSBC media account from struggling WPP (May. 22 2018)
    • Many biotechs are in the green in early trade after the U.S. House of Representatives voted in favor of the Senate's version of "right to try" legislation yesterday. The bill, expected to be quickly signed into law by President Trump, will allow people with life-threatening illnesses to obtain unapproved drugs that have been vetted for safety in early-stage studies. In other words, the federal government will not interfere with a person's efforts to gain access to such a drug in this situation.
    • Critics say the law, which does not guarantee access the medications, will not have any appreciable effect on the status quo since supplies of investigational drugs are limited because developers earmark them for clinical trials.
    • Selected tickers: (CRSP +7.3%)(EDIT +4.8%)(NTLA +5.2%)(UTHR +1.6%)(PBYI +1.9%)(BMRN+2.2%)(BIIB +1.1%)(CELG +0.8%)(XBI +0.9%)(BIB +0.9%)(ADVM +2.5%)(ABEO +1.4%)(RCKT+1.5%)(QURE +9.4%)(VYGR +2.8%)(RARE +0.8%)(SGMO +2.2%)(ONCE +4.6%)
    • Medical Marijuana (OTCPK:MJNA +2.1%) reports Q1 revenue growth of more than 190% Y/Y exceeding $10.5M.
    • Total gross profits for the quarter increased more than 30% to $3.3M.
    • Wholly-owned subsidiary Kannaway revenues increased more than 325% to $7.5M.
    • "In Q1 2018, we had the best revenue quarter in the history of our Company," said Medical Marijuana, Inc. CEO Dr. Stuart Titus. "We're excited that, with the help of our investors, spokespeople and customers, we've experienced tremendous growth and the company is positioned well for continued explosive expansion."
    • Press Release

    • The recreational vehicles sector is trading lower on the day amid some drama with Camping World (CWH -12.1%).
    • Camping World disclosed in a SEC filing that it changed auditors to Deloitte & Touche from Ernst & Young, a notable event due to the "material weaknesses" in internal controls reported for FY16 and FY17. "The Committee has discussed the material weaknesses in the Company’s internal control over financial reporting with E&Y, and has authorized E&Y to respond fully to the inquiries of Deloitte concerning such material weaknesses," updates the Camping World audit committee.
    • It's unclear the direction connection, but decliners on the day within the RV sector include Winnebago (WGO -6.4%), Thor Industries (THO -6%), LCI Industries (LCII -3.1%) and Arcimoto (FUV -3.3%).
    • SEC Form 8-K
    • Target (NYSE:TGT) is down 5.25% as the retailer's aggressive push to keep up with Amazon and Walmart, both online and in grocery, leads to biting margin pressures.
    • The company's digital initiatives include delivery, lightning fast store pick-up and low shipping fees — while on the grocery side of the business there is a pricing battle raging in many key categories.
    • The general consensus from Wall Street analysts is that the competitive retail environment is likely to keep margin growth a challenge for Target in the near term, but that the company is doing a noteworthy job at staying relevant (see Sears chart) with an eye to the long term.
    • Previously: Target misses by $0.06, beats on revenue (May 23)
    • Previously: Traffic strong at Target (May 23)
    • CIBC (NYSE:CM) plans to seek Toronto Stock Exchange approval to buy back 9M shares, or about 2% of its outstanding shares, over the next 12 months. That would come to about C$1.04B at its recent stock price on the Toronto Stock Exchange.
    • (CM -2%)on NYSE.
    • FQ2 adjusted EPS C$2.95 vs C$2.64 year ago.
    • FQ2 adjusted return on equity 17.4% vs 18.8% in FQ1
    • FQ2 residential mortgage balance growth slowed to 6% from 12% a year ago, bringing its mortgage lending business closer to other Canadian banks.
    • CM's FQ2 U.S. commercial banking and wealth management net income strengthened to US$107M from US$19M a year ago.
    • Source: Press releasesupplemental information
    • Previously: Canadian Imperial Bank beats by C$0.13, revenue in-line (May 23)
    • Samsung (OTC:SSNLFOTC:SSNNFwants AI features and internet connectivity in all of its products by 2020.
    • The company hopes that turning its home appliances into smart home players will drive demand for appliances, televisions, and even the company’s smartphones.
    • ABI Research predicts that 280M homes will have at least one internet-connected smart home device by 2022, which is over five times the 52M last year.
    • Samsung’s smart home products will centralize around its SmartThings app.
    • Samsung would prefer its customers to use its Bixby voice assistant but remains open to partnering with other companies.  

    Apple launches privacy portal for user data ahead of GDPR

    • Apple (NASDAQ:AAPLlaunches a privacy portal for users to download any information or data the company has associated with their Apple ID.
    • Data can come from purchases/activity on the App Store, iTunes, iBooks, Apple Music, Apple’s online and retail stores, and AppleCare. General data includes iCloud bookmarks, calendar entries, photos, reminders, and documents. 
    • The portal currently only works for accounts in the EU ahead of the General Data Protection Regulation, which goes into effect on Friday. 
    • Apple shares are down 0.6% to $186.12.  
    • Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) has started mass production of its next-gen 7nm processors for the new Apple (NASDAQ:AAPL) iPhones launching this year, according to Bloomberg sources.
    • The processor will likely be called the A12 chip and will have a smaller and more efficient performance than the 10nm chips in current iPhones.
    • TSMC announced the 7nm mass production in April but didn’t disclose a partner.
    • Taiwan Semiconductor shares are down 1% premarket to $39.25.
    • Post updated to correct ticker.

    • Frontier Communications (NYSE:FTR) is stumbling out of the open, down 3.8%, as it's back in talks with bondholders after an auction of Florida assets failed to garner a high enough price to go through.
    • It got multiple bids for landline assets in Florida — part of the California/Texas/Florida assets it acquired from Verizon two years ago for $10.5B -- but decided not to sell.
    • Proceeds were expected to go toward reducing a monster debt pile of $17.8B.
    • It's looking to unload the CTF package, but in pieces rather than the package deal it made with Verizon.
    • “The problem is that they have a weak negotiating position," says Creditsights' Lindsay Gibbons. "If they sold Florida for less than what they paid, it wouldn’t look good and it puts a watermark on the other asset values.
    • New Jersey Gov. Murphy plans to sign legislation to rescue three struggling nuclear power plants run by Exelon (NYSE:EXC) and Public Service Enterprise Group (NYSE:PEG), a move expected to cost ~$300M/year, Bloomberg reports.
    • Murphy will sign the nuclear bill along with legislation calling for half the state’s energy to come from renewable energy by 2030, according to the report.
    • The decision comes after New York and Illinois already have thrown lifelines to reactors, which are struggling to turn profits as cheap natural gas and renewable energy have depressed power prices.

  19. Webinar time (if my computer ever stops updating!)


  20. GE…dangit!


  21. Jabo,

    GE only yesterday we discussed this stock and one member was worried about his Jun 15 caller. See my comments.

    However today small play on CLX sell the 115/120 Jul strangle and buy the stock. CLX is reporting 7/31 could be interesting. Combined return 2.9% over 58 days. Should you think CLX will be bullish before reporting sell the 120/120 straddle. The dice could be rolled on witching day July 20.


  22. NYCB is very cheap and, as noted by Sri in the Webinar, now that the rules have been rolled back – they can expand.  Nice 0.68 dividend on a $12 share is 5.75% while you wait so let's add them to the LTP as a dividend-payer.

    • Buy 2,000 NYCB @ $12 ($24,000) 
    • Sell 15 Jan $11 calls for $1.40 ($2,100)
    • Sell 10 Jan $13 puts for $1.50 ($1,500)

     That's net $20,400 and, if we get called away at $11, that's $22,000 + $680 in dividends is $2,280 (10%) in profit in just 8 months and we can also make some extra money selling 5 short calls along the way.


  23. For my liking NYCB armchair sell the Jul 12/12 straddle @ .75 and by the stock 3.6% combined over 58 days. Selling the Jan 11 caller you might get call before the 8 month and you get back only 22,000 while you paid 24,000. In Phil's case he takes the full payment of div. over the 8 month. At 12 you will be assigned for the 13 puts as well. In July I can evalued my future play much more comfortable in my chair!


  24. NFLX new all-time high…unreal


  25. LOW – a lot of volume and surge on missed earnings today.


  26. A very good article on FTR:  

    https://seekingalpha.com/article/4175011-frontier-communications-company-delivering-critical-factors-revenue-ebitda-margin

    Phil, I know your target is $8 for the LTP position, but do you see a flaw in the author's logic?  He thinks if the trends persist (a big if I know), FTR should survive, and pay down a ton of debt, and could be worth $50+ in a few years.  They are down big today because they weren't able to sell some of their assets at a good price, but if this analysis proves to be correct, this could be a huge winner.  5G could be a concern, but I looked into it, and it seems like that will mainly be a high density city play, at least for the first decade, since the range isn't very good.

    I'm holding $70k of stock (at today's prices), along with some 2020 $8/22 call spreads.  Which is about 5% of my investable assets.  I've effectively tripled down at priced under $10.


  27. NYCB/Yodi – Our net on just the stock and calls is $10.60 so getting called away at $11 is +$800 and then we just have short puts and make up to $1,500 more for the same $2,280 ($2,300) if all goes well. Not a worry getting called early.

    NFLX/Jabob – Tempting but too scary to short.  Good for IQ though.  

    LOW/Scott – For some reason, people think Bill Ackman getting involved is a good thing! 

    • Pershing Square Capital Management teamed up with another activist investor to take a +$1Bstake in Lowe's (LOW +9.9%), sources tell The Wall Street Journal.
    • Pershing founder Bill Ackman reportedly supports the decision of the company to bring in former J.C. Penney chief Marvin Ellison as CEO. Of course, Ackman lost a fortune with an ill-timed bet on former J.C. Penney CEO Ron Johnson.

    FTR/Palotay – If they hit all their goals then yes, $50 is very possible but we played super-conservative as they navigated this very dangerous part of the cycle.  Happy to plow our profits into more aggressive spreads if the next few Qs keep them on track.  5G is a huge wild-card but so was WiMax 10 years ago and that never worked out.  If you have $8/22 bull call spreads and the stock, then I'd certainly sell 1/4-1/3 short calls for cash.  You can get 0.70 for the July $9s and the $8/22 spread is $2 so let's say you have 100 ($20,000) and you sell 40 of the July $9s for 0.70 – that's $2,800 and you have 10 sales to go for $28,000.  Be the House – NOT the gambler!  


  28. Today's run - my crypto epiphany:

    The US government could start, or officially endorse an existing crytpo coin. What they would do is build a fee into the software protocol that went to a single address that they control. This is effectively a tax. The fee could be a transaction fee, a percentage of the next block award, or a combination of both. How this works is every single transaction that occurs everywhere wihtin the system, the fee scalped goes directly to this single address that is owned by the IRS, in this case, the "New-IRS." Forget postcards. We're down to a single dude in one office chair in front of one computer. Imagine that being the IRS, because that's where this is going.

    The consequences of this mechanism are dramatic. First off the IRS is now one guy. Granted, this guy controls the private key for the most valuable thing in the world. This key would be the single most important key right up there with the nuclear launch code, but the system would most definitely still work. More strikingly, the US would essentially become the global government head. Every transaction wihtin the network sends tax to the US, even if it occurs between two individuals overseas. If the governments of those countries want some of the reward they need to get it from the US directly. Effectively this makes us a "global US" where every nation becomes an economic State. Of course, other countries could start their own coins to do the same thing. However, I have explained in detail elsewhere how crypto's are new System of Trust that approximate the Knowledge Economy versus nation-state fiat currencies that service the deprecated Manufacturing and Real Etate economy, and of which the United States is the unadulterated leader. Therefore, cryptocurrenices are self-valuing. Essentially you would be comparing the size of th US economy to the size of the foreign one, which is smaller and therefore the coin would be worth less. The US could also "buy-out" their coin (own >50% of the mining, and change the protocol as they see fit), so essentially the mechanism boils down to "the largest economy wins," in terms of becoming the dominant coin. Cryptocurrencies derive their inherent value from the social group that it represents. The entire Knowledge Economy of the United States is that very social thing; it is worth hundreds of trillions of dollars (or more, quadrillions even). In fact, it is worth so much the current fiat system that represents it cannot fully and accurately value it. 

    Let's say the IRS gets 0.01% of every transaction. Bitcoin traded $6.3B over the last 24h and is worth $129B right now (note, this was only what was traded through exchanges, not every peer-to-peer transaction). Bitcoin trades it's entire valuation ~20.5 days. The IRS hauled in US $2.3T last year, which is, ironically and totally coincidentally, also $6.3B per day. If it had a coin running 100X the valuation of bitcoin it could take a 1% "fee" on each transaction and achieve that income. 100x is ony $12.9T in market value. I would predict the value of such a coin could be more like $1.29Q, so the IRS fee could be 0.01% of all transactions. The coins the IRS earns re-enter the open market as the US goernment spends it's money on operations (military, salaries, welfare, etc etc). Ideally the Treasury wuld be required to spend the annual amount to zero. Any excess could be distributed as a minimum living wage (I doubt there would be any "excess", just IMHO).

    Think of the productivity gains of such a system:
    - Nobody files an income tax return. The burden to the public is exactly zero. For those of you that wanted "post cards," I humbly submit to you crypto!
    - Along with perosnal income tax returns, there's no corporate taxes, social security, FUTA, excise or border taxes, etc.
    - There's no longer a need for auditing. The budget of the entire IRS drops to effectively $0.
    - There is no longer any such thing as a tax crime. Even iliicit drug dealers are paying the exact same tax as the rest of us.
    - There's no such thing as non-profits or tax-exempt churches or anything political to get all hot and bothered about.
    - Taxes on transactions are a "flat tax" that is as flat as it gets. Every single transaction is identical.
    - As I mentioned above, international transactions pay the IRS the same fee. We effectively tax everyone world-wide for our own direct benefit.
    - There's no more national debt.

    Astute readers will note the closest fiat comparison we can measure is the US GDP ($18.6T) of which the IRS gets $2.3T, which is ~12.4%. So how can a new tax be a fractional percent? Firstly, it's a transactional tax and transactions occur more frequently than assessing incomes annually. Secondly, I submit to you the utter power and valuation of defining a New Economy (the Knowledge Economy) which is orders of magnitude (1 to 2) larger than the economy it is replacing. A similar thing occured in the transition from a largely agriarian economy (approximated by gold, now worth ~$8T) to the world-wide manufacturing and real estate economy, which became dominant in the early 20th century (now worth ~$220T).

    This idea may seem laughable. But consider there are a number of forces in play that so far have proven to be true, the most important being billions of people world-wide making personal decisions in their own best self-interest (with regards to crypto). Put simply, cryptocurrency is a more efficient and less corruptible system of trust than fiat currencies, and is instantly global once it is launched. Therefore its adoption is inevitable. People miss this siginifcant point at their own peril. The adoption will not be frictionless of course, just irreversible a long time scale.

    What I am talking about may be a little ahead of its time, but I think it should be considered. A lot of what you're investing in now will be shaped by these changes if they are occurring. It will be interesting to see if we can be ahead of the curve in ways that folks on PSW seem to be.

    Also worthy of note that ignoring this concept is actually a national security threat, because China could do the same thing. However, their economy is currently smaller than the US economy so their coin would not become the international standard at this time. China's economy is predicted to become larger than the US at some point in time though.



  29. BCD/crypto rant

    Hard to imagine anything more likely to get an alignment of business interests lobbying against the idea


  30. Very interesting BDC but I think you overestimate the income generation.  Our GDP is $20Tn, that's "transactions" per year.  You're including every trade etc to get your number and you're also saying the US can solve it's problem by being the only currency in the World and taxing that – not sure how that will go over with the other 200 countries on the planet.  Europe is bigger than us – what happens if they decide to beat us to it and take all the money?  

    $20Tn is $55Bn a day, which is about $300 per wage-earner spent on stuff.  If you are just taxing the stuff, even at 1% you're only going to get $200Bn – you can't spin straw into gold.  Still a 20% flat tax/skim would generate $4Tn with no cheating and no IRS and that seems very appealing but how do the states get their money?

    Meanwhile, my Russell short is busted – everything punching higher into the close.


  31. very interesting things to consider. I only present a theory based on what I see as a more efficient "system." All of the timelines, scenario permutations and downstream consequences are impossible to predict.

    I could see the US Gov't say "let's launch a coin," almost as a side project just for fun. Just put one out there and take a 0.1% transaction fee for grins and giggles. Within a year the thing just blows up, I mean simply just gets HUGE, and the points we are considering actually start to matter.


  32. GE giveth and GE taketh away!


  33. Pretty shocking statistics:

    https://www.motherjones.com/kevin-drum/2018/05/chart-of-the-day-women-are-taking-over-the-democratic-party/

    Less than 10% of GOP candidates for the house are women!

    Republicans have now lost not just nonwhites, and not just the young, but women as well. All they’ve got left are white men over 30. They’re managing to do pretty well with them so far, but how long can they keep it up?


  34. stjean--GE giveth? maybe to those who are short — ugh! ;-(


  35. FU LB!!!!!


  36. Phil, this is what I'm trying to address with GreenCoin 2.0, should we embark on the project. It's not a science or political argument. It's an economic one.


  37. LB is going to make me invest in a swear jar. Oh well, it's a long term play.

    **cries softly, assumes fetal position**


  38. Victoria's Secret parent L Brands shares down on outlook cut  Shares of L Brands Inc. (LB) fell more than 4% late Wednesday after the parent of Victoria's Secret and Bath & Body Works reported first-quarter per-share earnings above Wall Street expectations but cut its profit forecast for the year. L Brands said it earned $47.5 million, or 17 cents a share, in the first quarter, compared with $94.1 million, or 33 cents a share, in the year-ago period. Analysts polled by FactSet had expected earnings of 15 cents a share for the quarter. Sales rose 8% to $2.63 billion, compared with $2.44 billion a year ago and matching analyst forecasts. Comparable-store sales rose 3% in the quarter. L Brands cut its guidance for 2018 earnings to between $2.70 a share and $3 a share, from a range between $2.95 a share to $3.25 a share previously. It said it expects second-quarter earnings per share between 30 cents and 35 cents. The analysts surveyed by FactSet expect EPS of 40 cents. L Brands shares ended the regular trading session down 0.3%. 


  39. LB – Oh no, they will only earn $2.70 per $34 share?!?  Why God, why????  Holy crap people, the reason we like them is because people are idiots and don't know how to value a company – don't go run and join them as soon as we hit a bump in the road!

    Same with GE, back at $14 again, where it's a screaming buy.  

    These are INITIALLY 2-year trades and sure, it would be great if, like THC or IMAX or SPWR or VRX or CMG they took off in the first Q and blew through our targets without any trouble but it would be juvenile to expect that to happen every time – as much so as it would be completely irrational and ignorant of the working of Finance to think that it's easy to make 300% returns on trades just because that's your opening ask when you set up a spread.  

    If it were that easy – then the premiums would be such that we'd only be able to get 20-40% initially, since the odds so strongly favored a winning outcome.  

    We're down net $11,000 on our LB position in the LTP, worse tomorrow and it looks like this:

    Short Put 2020 17-JAN 37.50 PUT [LB @ $34.05 $0.06] -15 5/11/2018 (604) $-14,550 $9.70 $-0.55 n/a     $9.15 $-0.25 $825 5.7% $-13,725
    Long Call 2020 17-JAN 30.00 CALL [LB @ $34.05 $0.06] 30 4/20/2018 (604) $23,400 $7.80 $-0.10     $7.70 $0.70 $-300 -1.3% $23,100
    Short Call 2020 17-JAN 40.00 CALL [LB @ $34.05 $0.06] -15 4/24/2018 (604) $-6,375 $4.25 $-1.15     $3.10 $-0.70 $1,725 27.1% $-4,650

    Currently it's a $30,000 spread and is currently valued at $4,725.  At $2.70 per share, let's say they are worth 14x so $37.80 and at least 12x so $32.40 is very fair (on low end of guidance with each 0.10 beat adding $1.20) for Jan 2020.  Since our calls are $30s, it doesn't make sense to stay in for $32.50 so we have to decide whether to fold with a $15,000 (guessing) total loss tomorrow and lose 1/3 of a $50,000 allocation block which we can easily make back if we have a 1/4 investment ($12,500) that does make 300% – so one winner wipes out 3 losers.

    Or we can spend $5 to roll the $30 calls to the $20 calls ($15,000) and buy out the 15 short $40 calls for $2.50 ($3,750) and then sell 20 of the $35 calls for $4.50 ($9,000) so we've spent net $9,750 to be in the 2020 $20/35 bull call spread with the short $37.50 puts.  Since we think it's ridiculously low, we could sell 15 more of the $30 puts for $6 ($9,000) and then we're back to our original $11,000 loss on the $45,000 position that's $36,000 in the money at $32 and, since we still have 10 calls uncovered, we can begin selling 10 July $35s for $1 ($1,000) and, if we do that 10 times, we erase $10,000 in cost and drop our net on the $45,000 spread back to $11,000.  

    Yes, we have to work at it and yes, we're committing $20,000 to make $45,000 instead of $11,000 to make $30,000 we originally hoped for but now we have a wider spread that's 90% in the money with a very good chance of success and a in a good position to generate a bi-monthly income while we wait. 

    This is not a flaw in the strategy – IT'S THE DESIGN!


  40. LB – I hope those July 35 calls are at 1 but I suspect they will below .8…. 





  41. Why Home Sales Are Weak



  42. The Bill Gates Line



  43. Finally even on those /NQ shorts – now I can go to bed!  


  44. Here we go again! 

    • The Trump administration is considering a plan that would impose new tariffs on imported vehicles as high as 25% on national security grounds, WSJ reports.
    • Pres. Trump already has used the Section 232 legal provision to impose global tariffs on imported steel and aluminum and is now considering starting a probe of imported cars under the same law, according to the report.
    • Such a plan would face staunch opposition from various groups, from foreign trading partners to domestic dealers of imported cars.
    • Update: The White House issues a statement saying the Commerce Department is launching a Section 232 investigation to determine whether auto imports impact U.S. national security.

  45. Good morning!  

    I guess it's the pre-holiday week but nothing going on in the news – again.  

    SPY volume has been anemic this week as well.

    Today there is Fed speak around the 7-year note sale and it will be a surprise if Existing Homes don't disappoint. 

    Otherwise, we're likely to drift into the weekend at 2,728 and surprise, Surprise, SURPRISE – we're at 2,727.50 this morning!  

    Who says this TA stuff is hard?


  46. can somebody please tell me why I am in such a good mood today?