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GDP Friday – “Some Say 5.3%, Some Say 3.7%, If it has a 4 in Front of it, We’re Happy”

Image result for trump gdpThat's right, the President is at it again.

Less than a month after bragging about the jobs numbers before they were released, President Trump told a rally yesterday:  "Somebody actually predicted today, 5.3.   I don't think that's going to happen — 5.3. If it has a 4 in front of it, we're happy. If it has like a 3 but it's a 3.8, 3.9, 3.7, we're OK."  So of course the market rallied yesterday as earnings have been decent and we must be having spectacular growth if the President says so.  After all, when has Donald Trump ever lied to us?

We get the official GDP Report at 8:30 but, as you can see from the St Louis Fed's chart above, Real GDP, which takes into account that the Dollar is still down 7% from when Trump took office, has been a disaster under Trump with just 2.5% average growth and, as you can see, we've had 6 quarters of growth over 3.75%, 3 of which were over 4.5% since the Recession and none of those were under Trump (I won't say who it was because the President will say it's FAKE NEWS).  

The Atlanta Fed is sticking to their 4.5% forecast (see Wednesday's notes) and we might hit it with the inventory growth but piling up inventory at the docks because of a sudden tariff tiff is not a true positive on the GDP – the assumption is those goods will ultimately be sold but maybe not as Trump is already bailing out the Farmers who can't sell $12Bn worth of crops.

Yesterday's Durable Goods Report was a big miss, increasing just 1% vs 3.2% expected and, excluding Transportation (Boeing is a huge variable), it was only up 0.4%.  May was -0.3% and April was -1% and that's the quarter so the economic strength, assuming we are getting it, is not coming from things that will last and it's not coming from housing and it's not coming from commercial development – it will be interesting to see where the GDP number does come from.

Meanwhile, I already put out a note to our Members to short the Index Futures as we expected some earnings misses this morning (and nothing last night was very exciting) and Twitter is now the 2nd big Tech company to do a face(book) plant with a 15% drop this morning as they reported an already expected net loss of users after their massive purge of fake accounts.  The company still made $100M on better than expected revenue but, like Facebook – it's just not enough to support the kind of multiples on earnings we have on these high-flyers.  My morning note to our Members was:

Things seem to be holding up so far.  /YM back to 25,550 and also /RTY 1,700 along with 2,845 on /ES and 7,440 on /NQ so shorting the laggard but favoring the /YMshort still.  

/RB testing $2.17 makes a nice short into the weekend but might push higher first. 

/KC back to $109.50 so I like that long and that's $121.20 on /KCN9

/SI below $15.40 so long there if it goes back over (only) with very tight stops below.

There hasn't been a dramatic move yet but we're grinding lower ahead of the GDP and, with Trump's pump job – anything less than 4% will now be disappointing and even 4.5% is now only in-line with higher expectations set by the President.  There's a lot of noise in a GDP Report but we'll try to get the Final Sales number, which is the most reliable component and Retail Sales have been strong, albeit on borrowed money.  Also, Government Spending is a huge wildcard and the timing is under Trump's control – so he may have stuffed that number in Q2 (was 1.3% in Q1).

8:30 Update:  LOL!  GDP expanded at 4.1% which, thanks to Trump overselling it, is now a disappointing result and the indexes are indeed turning down, despite growth officially doubling from Q1.  Consumer spending did lead us higer – up 4% but the real star was Commercial (non-Residential) Fixed Investment, which popped 7.3% and that's something you can see all around you by counting cranes.   Final Sales were indeed up 4.3% so this is a good GDP number overall.  

Exports contributed 1.06% to the GDP as farmers rushed to ship Soybeans ahead of China's tariffs – that will come back to bite us next Q.  Another huge bump was the 3Mb/day of Petroleum Products we are now exporting at decade-high prices as oil topped out at $75 during the quarter – another item that will reverse in Q3.  Housing was weak, as expected and Government Spending went up 50%, to 2.1% and added 0.4% to the GDP led by defense spending so, in other words, Trump wrote a big check (with your money) to his Defense Contractor buddies to push the GDP over 4% so he could crow about it and tell you how great he is.  

Keep in mind that 4% GDP growth pretty much forces the Fed to keep raising rates!

Amazon is doing great in the race to a $1 Trillion valuation with an earnings beat last night that should be good for a 5% bump that will take them to $1,900/share and they need $2,063 to hit that target.  As usual, Amazon's earnings pretty much all came from Cloud Services, which are up 50% since last year at $6.1Bn and pretty much all profit since the costs of their cloud is borne by the retail operation.  There was also $2.2Bn in Advertising Revenue.  Nonetheless, overall operating profits were "just" $2.9Bn, which means the Retail Segment continues to bleed cash but kudos to Jeff Bezos, who managed to find other, much more profitable businesses to run and cover up the fact that the core operation is a money pit.

Image result for unfair competition definitionThe problem with this, however, is that Amazon's ability to run on-line retail at a massive loss is forcing other retailers out of business and that's simply not fair and fair business practices used to be something we were concerned about in this country.  There's nothing we can do about it (other than, ROFL, vote for Democrats) – just an observation.

I'm always amazed at how analysts seem unable to understand that AMZN has a profitable CLOUD business, like many other cloud companies, and a profitable ADVERTISING business (like GOOGL, TWTR, FB) and a very, Very, VERY UNprofitable Retail Business – like no one else who is able to stay in business for very long (except SHLD, apparently).  

Then these "analysts" latch onto news like AMZN's push into the MASSIVLY UNPROFITABLE grocery business and begin saying silly things like "Groceries can double their business so I'm raising my price target to $4,000."  The margin on groceries is even worse than the margins on retail – and that's before you start delivering them!  What saved AMZN this Q is that they MISSED their retail sales number, so that division lost LESS money than it was projected to but, if you want to properly value AMZN, you have to break it up into 3 companies, not just extraplote numbers on Retail.

Even if AMZN makes $12Bn this year, that's still less than AAPL will make this quarter, yet those two companies have the same valuation?  Why am I the only analyst who sees how ridiculous that is?  If AMZN is a Trillion Dollar company then AAPL is good for $2Tn at least and Microsoft, who makes over $20Bn a year (about double AMZN) has all the good parts of Amazon with cloud services and advertising but it doesn't have the money-losing Retail Operation to drag it down.  Even MSFT seems a bit expensive at 40x earnings but still a huge bargain compared to AMZN's 80x (AAPL is below 18x earnings at $954Bn – they deserve their Trillion!).  

Remember, until yesterday, Facebook was in the running to become the World's first Trillion Dollar company.  Had they gone up 20% instead of down 20%, they would have been neck and neck in the race.  GOOGL is the other contender at $850Bn but we're past their earnings and it's not happening this quarter and, like MSFT, they too are in the $20Bn earnings club trading at 42x earnings.

We have until next Wednesday to see if Tesla (TSLA) will destroy the market by losing $2Bn in the quarter and dropping over 20%, spooking investors out of many other high-flying stocks but, having cleared the FB hurdle, I'm a little more confident that the market can withstand it and 4% GDP is not bad, no matter how you slice it.

Have a good weekend, 

- Phil

 


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  1. 4.1% as predicted by Trump! All his cronies had this number 2 days ago I am sure…



  2. We only had to add $2T to our debt to get that 4.1% growth for one quarter. Seems like an efficient use of our money.


  3. And someone has some 'splaining to do today! Besides that meeting where the Russian government offered dirt on Clinton that Trump was aware of and approved, there was no collusion at all! Fake news… 


  4. The long term impact of tariffs:

    https://www.bloomberg.com/view/articles/2018-07-26/inflation-is-coming-thanks-to-trump-s-tariffs

    Steel prices are up more than 40 percent since Trump said on March 1 that he planned to impose a 25 percent tariff on steel imports and a 10 percent levy on aluminum. That is a significant increase that has yet to be passed through to consumers. But it will, and when that happens, potential risks to both the stock market and the economy increase dramatically.[...]

    Now for the really troubling news: If tariffs cause price increases to accelerate, the most natural outcome will be for the Federal Reserve to step up its cycle of raising interest rates.[...]

    Increases in the fed funds rate will eventually raise the cost of credit, and that will begin to spread the hurt to other sectors, such as the financial and real-estate industries. If it gets to this point, the economy will start slowing, with the risk of a recession becoming more likely. The financial markets will see this and begin to trend lower long before the official start date of any recession.


  5. It looks like Jeff Bezos added more net worth overnight than Trump's entire net worth! That must really piss off our president…


  6. trump pump in sixty seconds lol


  7. Good Morning.


  8. Good morning! 

    Suddenly we're testing 13,000 on NYSE, that's pretty good.  If RUT breaks over 1,700 and holds it, we'll have to take this rally seriously but I still think this is the top (though I thought that in Nov too!).  

    $2Tn/StJ – Great point.

    Bezos/StJ – Last I heard, he owns 17% of AMZN – nice day for him as they gain $30Bn.

    Bezos was born Jeffrey Preston Jorgensen on January 12, 1964, in AlbuquerqueNew Mexico, to a teenage mother, Jacklyn Gise Jorgensen, and father Ted Jorgensen, a bike shop owner and Chicago native.[3] At the time of her son's birth, Jacklyn was a seventeen-year-old high school student.[4] After Jacklyn divorced Ted, she married Miguel "Mike" Bezos, a Cuban immigrant, in April 1968.[5] Shortly after the wedding, Mike Bezos adopted four-year-old Jorgensen, whose surname was then changed to Bezos.[6] The family moved to Houston, where Mike worked as an engineer for Exxon after he received a degree from the University of New Mexico.[7] Bezos attended River Oaks Elementary School in Houston from fourth to sixth grade.[8]

    Jeff graduated from Princeton University in 1986 with degrees in electrical engineering and computer science. He worked on Wall Street in a variety of related fields from 1986 to early 1994. He founded Amazon in late 1994 on a cross-country road trip from New York City to Seattle

    Bezos often displayed scientific interests and technological proficiency; he once rigged an electric alarm to keep his younger siblings out of his room.[13][14] The family moved to Miami, Florida, where he attended Miami Palmetto High School.[15][16] While Bezos was in high school, he worked at McDonald's as a short-order line cook during the breakfast shift.[17] He attended the Student Science Training Program at the University of Florida where he received a Silver Knight Award in 1982.[18] He was high school valedictorian and a National Merit Scholar.[18][19] In 1986, he graduated from Princeton University with a 4.2 grade point average and Bachelor of Science degrees in electrical engineering and computer science and was a member of Phi Beta Kappa.[20][21] While at Princeton, he was also elected to Tau Beta Pi and was the president of the Princeton chapter of the Students for the Exploration and Development of Space.[22][23]

    Great American success story and you can see where Trump would really rub him the wrong way. 


  9. /RB hit $2.18, that should be about it so safer to short now (but still dangerous, of course). 

    /YM officially lagging as the other indexes break our lines (25,547 still).


  10. Trump saying Trade Deficit dropped $50Bn (not even 10%) as if that's fantastic (petroleum exports are most of it, which costs Americans a fortune) and then says, "That's adding 1.2% GDP" – like he doesn't even understand the words he's saying!  


  11. The other World leaders all say to him "Mr. President, congratulations, you have the Worlds best economy, how do you do it?"  OMG, he's friggin' insane!  


  12. Debt / Phil – Remember when Obama had to fight tooth and nail just to get the GOP to accept that $900B stimulus as we tried to dig our way out of the worst recession in 80 years and these same guys added $2T and they think that they hit the jackpot with that one good quarter! I can't imagine what we could have done if we had truly tried in 2009 rather than have to settle for small stuff because one party was so intent on making Obama look bad!


  13. Once again, Trump wakes up on 3rd base after 8 years of hard work from other people and he thinks that he has hit a triple….


  14. The story of his life… He gets a small $1M loan from his dad and he thinks that he is a self-made millionaire. What an egomaniac… 


  15. Wow, now he's bragging about 3.5M Americans no longer on food stamps – it's mostly because he changed the requirements and made them ineligible!  Trump is like the Nazi who pushes children onto the trains and tells them they are going on a nice vacation to a summer camp in Auschwitz.  

    Indexes not buying it, turning lower (not the Dow, which I'm pretty sure is being propped up for him).  

    Trump/StJ – Actually he got $30M + more over time:

    • a 1985 casino-license document showed that Donald Trump owed his father and father’s businesses about $14 million.
    • Trump joined his father’s thriving real estate business after college and that he relied on his father’s connections as he made his way in the real estate world.
    • For instance, Fred Trump — along with the Hyatt hotel chain — jointly guaranteed the $70 million construction loan
    • Trump also benefited from three trusts that had been set up for family members. In 1976, Fred Trump set up eight $1 million trusts, one each for his five children and three grandchildren, according to a casino document. (That today would be worth about $4 million in inflation-adjusted dollars.) The casino document lists several other loans from Trump’s father to his son, including a $7.5 million loan with at least a 12-percent interest rate that was still outstanding in 1981.  
    • In a 2007 deposition, Trump admitted he had borrowed “a small amount” from his father’s estate: ‘I think it was like in the $9 million range.” And as Trump’s casinos ran into trouble, Trump’s father also purchased $3.5 million gaming chips, but did not use them, so the casino would have enough cash to make payments on its mortgage — a transaction which casino authorities later said was an illegal loan.

    /RTY down 0.5% at 1,692.50


  16. I guess he needs shiny new objects to distract from the fact that his presidency is getting more illegitimate by the day!


  17. is mr cohen telling the truth mr president

    silence


  18. Phil/HMNY

    TOAST!


  19. Beach photos from 1976 – before fast food and junk food marketing dominated the planet and people used to eat simple meals at home most of the time:

    And no one was on their phone and no one was playing music.  In fact, I think those things are books – AMAZING!

    Is it hot in here or is it just me?

    While we are cutting off trade, China is going in a different direction:

    A growing number are "ghosting" their jobs: blowing off scheduled job interviews, accepting offers but not showing up the first day and even vanishing from existing positions – all without giving notice.

    HMNY/DC – Yes, sadly it looks like it's not viable.  Sorry about that one folks, I thought it was worth a gamble but that doesn't make losing money suck any less.  

    Is the Game Over for Helios and Matheson? 


  20. Maxim Group downgraded HMNY from Buy to Hold yesterday – must have seen something in the price action they didn't like ROFL!


  21. Beach photo – You can still see the same image….in Europe!  


  22. a $40 mio yacht on lake Erie; gotta catcha a lotta carp and catfish


  23. The dollar is “topping out” and will face sustained pressure as early as next month, says Morgan Stanley

    Amazon is basically becoming a subscription based website that sells advertisements with an enormous cloud computing division

    Bill Clinton had 6.45% GDP growth by this point in his first term (Q2 1994).

    Japan’s central bank has made its second intervention in a week to support the domestic bond market. Here's why.

    Just like with fruits or vegetables, you can juice raw cannabis leaves or buds

    Facebook's one-day $123bn market cap loss is bigger than entire value of:

    * Nike * GE * Goldman Sachs * BlackRock * Starbucks * Rio Tinto * Vodafone * Siemens * Airbus * Diageo * BNP Paribas * The Kuwaiti stock market * The Argentine stock market * The Colombian stock market

    Avenatti represents three more women claiming Trump hush deals

    What a great job Trump did!  

    Europe/1020 – That's true but there's always some naked German guy ruining things…

    Yacht/Rexx – What on earth do you do with 10 yachts?


  24. INTC/Phil- does this interest you at this price?


  25. Avenatti / Phil – Remember, Bannon said that they paid hundreds of women… Probably an exageration but there are more coming along I am sure.



  26. Mars to track blood moon in double celestial treat on Friday




  27. Phil/HMNY

    Why would anyone take this chance and loan HMNY money?  If nothing else, it is curious.


  28. 10 seagoing yachts?…hmm…let me ask my leettle friend….


  29. Trump Touts GDP Gain; Markets Shrug



  30. Democrats are ‘substantial favorites’ to win the House



  31. INTC/Dave – I'd let them find a bottom but yes, solid long-term – they just got a bit ahead of themselves.

    While a drop seems attractive, they only make $10Bn on a $220Bn valuation at $48 so this is not "cheap" – it's just getting back to normal and, as I've said many times, I won't feel good about buying stocks until this whole market gets more normal as there is probably about $2Tn (FB lost 6% of that yesterday) in overvalue in the indexes and that's going to take a while to wash out of these prices.   Just because so a lot of companies are trading at 30x earnings – it doesn't make them a bargain when they drop to 20x – especially in a rising rate environment. 

    Also, keep in mind, these are their earnings with GREAT GDP growth in Q2 – what will happen when things stall?

    Hundreds/StJ – Well if it's "hundreds" I have to give Trump some props!  No wonder he doesn't drink – who has time?

    HMNY/DC – That's why I think there's still something cooking there – it's just taking longer than people have patience for.  

    Yikes, that was close on /YM – almost lost my nerve but there was nothing in the news to suggest it shouldn't be heading lower.  Finally got the dip.

    /RTY down 1.6% now – you wouldn't know it from watching CNBC, where Trump is AWESOME! 

    And the Dollar is trying to help but it's not:

    Helping gold, silver and coffee though:

    All in all – a very good day!   Still waiting for /RB to fall further at $2.1775 but that's one I'm willing to hold over the weekend (1).


  32. Hundreds / Phil – Still ways to go to catch up to Wilt:

    http://mentalfloss.com/article/12310/did-wilt-chamberlain-really-sleep-20000-women


  33. 20,000/StJ – Well, you have to practice 10,000 hours just to get good at it, right?

    7,350 is more than 1% down on /NQ, /RTY down 1.87%, /ES down 0.56% and /YM down just 0.16% – 0.5% more is 120 points ($600/contract) – fingers crossed!  


  34. Phil / value washing – absolutely right. And of course, that process is likely to be indiscriminate, impacting the high P/E companies, the well managed companies, along with the current 'value' companies. There is normally very few places to hide, except cash and hedges, when the waves of selling come. But of course, as the great writer Robert Louis Stevenson said:

    "Sooner or later every stock sits down to a banquet of consequences


  35. Wow, how was that for a good futures call?

    Very glad we added those hedges.  /ES /NQ and /RTY all blew through their S2 levels – very ugly with /RTY down almost 2.5% at 1,661.  Poor Trump, he was having such a good time this morning…


  36. Well, it sure was worth coming to work today!

    Have a nice weekend, I'm going to go play some poker…

    What, only 1pm?  Damn!  

    Well, as you can see, I'm taking the money and running here.  Whenever one index hit's the 2.5% line we can expect at least a weak bounce from all of them so let's see what the lines are.

    Oops, I should post this first! 


  37. Just for those who followed this early morning on TSN Tree play was filled at 7.10 BCS 4.20 for the putter

    and 1.40 for the cherry.


  38. Oil dropped $1 so watch for a nice gain on /RB.  If we have a nice gain today – no sense in risking the weekend.

    RLS/Winston – Very wise. 

    Bounce lines:

    25,550 to 25,400 is 150 points so 30-point bounces to 25,430 (weak) and 25,460 (strong) is what we look for.  Keep in mind, failing weak bounces is bad.  Overshoot would be 30 points to 25,370 – watch that too.

    2,850 (just because it failed, doesn't mean you don't count it) to 2,810 is 40 points so 8-point bounces is 2,818 (weak) and 2,826 (strong)

    I think I have to throw out 7,500 as a spike but, then again, 7,500 to 7,250 makes sense, so let's use that (that's the problem with the 5% Rule – you have to make a lot of judgment calls though you can be exact and it still works but the key is to use good consolidation spots, which indicate where BuyBots and SellBots met each other).  Anyway, so that's 250 points down so we'll look for 50-point bounces back to 7,300 (weak) and 7,350 (strong).

    1,700 is a no-brainer and down to 1,660 is 40 so 8-point bounces to 1,668 (weak) and 1,674 (strong).

    Nice Yodi, thanks! 


  39. Right at 2,818 on /ES (weak) so we'll see if we go higher.  /NQ is over 7,300 and /RTY is just below as is /YM.


  40. INTC

    FWIW- A tech guy that I follow says that competition from AMD is way overblown.

    Using today's weakness to start a position in some INTC short OTM puts.


  41. VOD – popped up in a screen.. pretty strong dividend (twice yearly). low in weekly channel.
    looking at 2020 buy/write… maybe buy shares, sell $25 calls and $23 puts for net $20 entry.. watching.


  42. VOD – probably just start with 2020  puts…


  43. INTC / Albo – Might be right with the competition from AMD although from what I read, it's much better than it has been. I would be more worried about competition from QCOM for portable devices and NVDA for datacenters. They now have a version of Windows 10 that runs in QCOM chips with much longer battery life and always on internet for example. But you are in QCOM already so I guess you are covered either way. NVDA way to expensive… 

    In any case, I am short puts in INTC already but waiting to add… They are not going anywhere.


  44. Nice overall dip today, but not the flush that would make me feel better…


  45. HMNY – On Tuesday after the reverse split was announced, I posted:

    ~~albo
    July 24th, 2018 at 2:18 pm | Permalink | Tweet thisIgnore this user 

    Can't believe it's still trading at .09 .

    ~~albo
    July 24th, 2018 at 2:57 pm | Permalink | Tweet thisIgnore this user 

    It should reverse to about $22 per share.  Then it will probably start sinking again from there.

    Now I'm trying a Kamikaze trade – Bought some HMNY at $2.35. Total spec ! ! !


  46. Weak bounces failing, /YM still lagging at 25,385 but I'm done for the day (would be so silly to blow it).


  47. HMNY / Albo – I understand that have another 1-250 reverse split planned for next Friday :-)


  48. STJ – Good one !  I think it most likely goes to zero.  But thought I might catch some shorts taking profits into the weekend.

    Only going to risk .20.  Hopefully !


  49. AMD/Albo – I have said for 20 years that INTC only suffers AMD to live so that they can point to them and say "we're not a monopoly".  Still, it's a good reason to buy AMD when they are low as INTC seems to purposely let AMD catch up before releasing their next chips.  

    VOD/Scott – An oldie we used to play.  Another one that's only RELATIVELY cheap but $64Bn at $23.50 with $2.5Bn in profits is 25.6x earnings for a phone company?  VZ is 7 and T is 6 and even CHL is 10 so I'd need a damned good reason to pay 25x for VOD – especially since the profits are VERY uneven:

    Year End 31st Mar 2013 2014 2015 2016 2017 2018 2019E 2020E CAGR / Avg
    Revenue €m 46,698 45,469 48,385 49,810 47,631 46,571 45,897 46,649 -0.05%
    Operating Profit €m -2,703 -4,640 2,073 1,320 3,725 4,299      
    Net Profit €m 507 70,261 7,279 -5,405 -6,297 2,439 3,008 3,473 +36.9%
    EPS Reported -1.92 4.95 2.86 -2.03 -0.78 1.58      
    EPS Normalised 0.48 7.20 2.93 -1.80 -0.98 1.63 1.07 1.24 +27.5%
    EPS Growth % -83.2 +1,392 -59.3       -34.3 +15.8  
    PE Ratio x           12.3 18.7 16.2  
    PEG x           n/a 1.18 0.72
    Profitability

    Flush/StJ – Can't be expected today as we did have a "GREAT" GDP report and then Mon/Tues is window-dressing but then we'll see how Aug goes.

    I'm going away for 2 weeks Aug 4-19th but it's Disney the first week, so I'll be on most of the time and then on a cruise (Disney too) 12-19 when I'll be off for part days and maybe one full one.  

    HMNY/Albo – Better buy a lot because they may have to do another 1/250 reverse split soon!  crying

    LOL, and what StJ said – GMTA!

    Wow, only 2:41?  Why is today taking so long?  


  50. HMNY – I'm out.  That was quick !


  51. LOL, they had to reverse split to $22 or they wouldn't have been able to drop another 90% this week!


  52. We are now below a penny!


  53. Phil / AAPL – taking on the chin today (relatively speaking) 


  54. You have to trade HMNY on a 1-minute chart it seems! I just don't see a recovery from there unless someone swoops in with $500M this weekend. Not impossible, but very unlikely. It would have to be a charitable act at this point. Maybe Trump can give them some advice on dealing with bankruptcy!


  55. AAPL/Batman – That's normal ahead of earnings and the Nas is a huge drag but if AAPL somehow falls 10%, it will be catastrophic because it's such a big part of the indexes.

    HMNY/StJ – Clearly they lied about having a line of credit and not needing to borrow so we're screwed.  Of course there will be shareholder lawsuits but what will there be to recover.  Also, 3M people mostly paid annual fees in advance of $300M – they'll be wanting that money back ahead of shareholders.

    TSLA has a similar problem (see above) with people who put deposits down on their cars.  


  56. In fact, TSLA 2020 $300 puts are now $77.75 – kind of like HMNY's were as the shorts piled in!


  57. "I'm going away for 2 weeks Aug 4-19th"

    Me too! Headed to a sunny little island, hopefully flat by then so I can casually manage positions from a phone. 

    Good day today once /YM broke!


  58. Better check for volcano activity – all this extra heat is making the Earth angry!  

    Image result for you won't like me when i'm angry gif

    /YM/Ati – That's my tugboat theory.  The indexes can go off in their own direction – to a point – but then the one that's not following the rest tends to get snapped back at some point.  The S&P is like the ship they are towing and /RTX has the most slack in the line to do its own thing but /YM and /NQ don't stray too far from /ES for very long.  

      


  59. Well, no kaboom but some rational behavior from the markets after that GDP report is very nice to see.  

    Have a nice weekend, 

    - Phil


  60. https://money.cnn.com/2018/07/27/media/moviepass-service-outage/index.html

    ~~MoviePass couldn't afford to pay for movie tickets on Thursday.


  61. HMNY

    Image result for toast


  62. Going to use my movie pass tonight, as clearly bitcoin are the only solid investments.


  63. That's why they needed the money today.  Seems like they didn't pay a card processor but what's going to happen over the weekend 


  64. Lengthy, but interesting article on Masayoshi Son, of Softbank, if anyone is interested.  Unfortunately, the stock has no options.

    https://contrarianedge.com/2018/07/09/what-would-you-get-if-you-crossed-warren-buffett-richard-branson-and-steve-jobs-updated/


  65. If my memory is not too bad Phil might have mentioned C recently for an option play contender. Sorry Phil if my memory is fading!

    Due to the fact that the stock has increased form Aug 2016 44$ to Jan 2018 to 80$, again down to 64$ and today up to 71$, gives me, due to a very bumpy ride, an uneasy feeling to trade this stock.

    Remembering the last financial crisis the stock did not far too well.

    However just for the hell of it and for the exercise, and due to given recommendations by other sources, I did do some tingling this morning, and possible hope, I will hear from you guys how you feel about it.

    BCS  on C Jan 20 65/75 for 5.15 I start for the exercise with 2x sell the Jan 20 65 put x 2 for 4.75 (why 2 x I will explain later) and sell 1x Aug 18 for 1.05.

    Making my calculation, the BCS cost me (no commission incl.) 1030.00. The 2x put pays me 950.00 and the 1x Aug caller pays me 105.00

    So doing the math I walk off with a credit of 25$.

    Not taking the cherry call in to consideration, I often notice Phil sells only half of the leap putter. By selling only one Jan 20 putter my breakeven point is 67.92, however selling 2 x my breakeven is 65.65.

    Looking at the swing action of this stock, the same could be back at 45$ by midterm election.!!!!

    In this case not having sold any leap puts your total loss at 2x play would be about 880$. Did you however sold 2x leap put option, even at a stock price of 55$ you would show a loss of about 1500.00, as after 65.65 the short puts will increasingly work against your position.

    Again not having sold puts the loss will stay at 880, no matter how low the stock will go.

    Obviously it would be expected you will act, before running in these above mentioned situations.

    Many times I have been asked, do you make money on cherry calls?

    When selling this type of call you must always keep in mind that your cherry call will be ITM before or at expiration only due to rising stock value.!!! Basically if the cherry call runs against you, you need to look at the overall picture. In a rising stock price the long leap call and short put will always work for you, and only the short leap call will work against you.

    With cherry calls ITM, you can expect assignment if there is no premium left in the option, not to forget that during div. payment you have to incorporate the div. in your premium calculation, meaning you have to deduct the div. from you still remaining premium.

    For my two cents looking at the WFC ride over two years 47$ to 58$ we have only a swing of 11$ as C  27$, 44$ to 71$.

    Above, I have only given you an exercise. For me both stocks are too high (might be wrong) However I started WFC in my armchair trades at 53$ with a div. now at 2.93%, not the best as I like them over 3%.

    But as always it is your decision. I gave you this one only for the exercise.

    Have a nice Sunday


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  74. Good morning! 

    Not much going on over the weekend other than the normal corruption scandals.  Nothing "new" and it's end of month so they'll do what they can to prop things up until tomorrow but then there's earnings and non-farm payrolls and such.  AAPL earnings too!

    CAT is popping the Dow at the moment with good earnings.

    Oil back over $70 but hard to short this early in the cycle.

    /RB was a winner though, took a huge dive, as expected.

    You can talk oil up but /RB is local.

    Watch /BZ $75, that should be rejected and up from $68.50 means an 0.30 rejection from $70 on /CL should be good for $300/contract but watch out at $68.75 – nothing wrong with a quick $250 (only on a move back below $70 with tight stops above).

    Still looking for those weak bounces: