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Which Way Wednesday – Strong Bounces, Weak Follow-Throughs

Image result for monopoly cardAnother great day in the markets!  

In yesterday morning's PSW Report (just $3 a day and look at all our great days!) I said:

Today is the last day of the month so we're looking for bounces off of all those bottoms and you can play for the bounces (with very tight stops below), which are 20% of the drop as a weak bounce and 40% of the drop as a strong bounce where failing the weak bounce is bearish and the strong bounce has to be taken back in less than 48 hours, or that's bearish too.  

That means, for example, the 250-point drop on the Dow (/YM) should get a 50-point bounce, back to 25,350 just to be considered a weak recovery and 25,400 is the strong bounce line.  Anything less than a weak bounce today is a strong indication that we're not done selling off – especially on a window-dressing day like today.  On the volatile Russell (/RTY), we fell 45 points so we'll round up to look for 10-point bounces to 1,665 (weak) and 1,675 (strong) but we need a stronger Dollar for the Russell to get it in gear.

At the time, the chart on the Russell looked like this.  I know it's confusing because we only TELL you what is going to happen and how to make money on it but, when you look back at the trade ideas, you can't believe we didn't have today's chart yesterday, since the market does EXACTLY what we tell you it's going to do.  Pretty cool, right?

Likewise the Dow spiked up to 25,475 (up $875 per contract) but then failed it's strong bounce line at 25,400 and finished the day right between our predicted weak and strong bounce lines at 25,374.  Remember, we are not using TA – we are Fundamental investors who think TA is complete nonsense – this is just math.  It just so happens that our math (the faboulous 5% Rule™) tends to perfectly align with what actually happens on the charts because, whether TA is total and absolute BS or just regular BS (the jury is still out), since 95% of the traders believe in it and follow it, that in itself becomes a fundamental factor we take into account.  

Why did the Russell outperform the other indexes yesterday?  For exactly the reason we told you it could outperform – the Dollar got stronger!  This is not complicated, the Russell 2000 companies get over 75% of their revenues from the US – IN DOLLARS – so a strong Dollar is GOOD for Russell companies but not so good for S&P 500 companies, who get 60% of their revenues in other currencies.  Those are FUNDAMENTAL factors we use in order to determine where the market will go.

We also expected Apple (AAPL) to beat in their earings report and they did with yet another record quarter but, also as we predicted, it was not enough to push them over $200/share and it's not, by itself, enough to save the Nasdaq from completing our expected 10% correction (to 6,900) over earnings season so we're still short the broad index as our primary hedge, using the Ultra-Short ETF (SQQQ) as noted in last Tuesday's morning report

Those Jan $10 calls are already $3.50 per contract, up 40% in 7 days.  See, you don't have to play the Futures to make fast money in the markets – options work well too.  Just check out the spike of buyers as SQQQ hit our $2.50 target.  Did we call the floor perfectly or did we set the floor with our call?  It's very chicken and egg sometimes but, as long as we get to eat – who cares?

The Nasdaq is only down 250 points (3.33%) from the high and that's what a good hedge does, gives you a 40% gain on a 3% drop so 5% of your money put aside on hedges can mitigate 2/3 of the damage on the way down.  A good hedge doesn't prevent you from losing ANY money – when you do that you are over-hedged and over-hedging is more likely to prevent you from MAKING money!

As noted in our recent Money Talk Portfolio Review (7/17), which we adjusted live on the show that night, you have to have a trading plan for each of your positions and you have to KNOW how much money you expect them to make and you have to KNOW whether they are on track or off track at any given time and you have to be ready, willing AND able to make the necessary adjustments to keep them on track (or cut them loose) as necessary.  If you KNOW exactly how much money your positions will make in a good market and how much they will lose in a bad market – your hedging decisions become obvious.

In that review, after cashing out $54,650 worth of winners in a portfolio that started with $50,000 last September, we had a new trade idea for General Mills (GIS) as follows:

As a new entry, I like a nice, boring play on General Mills (GIS), makers of Bisquick and Cheerios, Cocoa Puffs, Fruit Roll-Ups, Go-Gurt, Haagen-Dazs, Lucky Charms, Old El Paso, Pilsbury, Progresso and dozens of other things you have in your cabinets.  Last year, GIS made $2.1Bn on $15.7Bn in sales yet you can buy the whole company for $26.25Bn at $44.25 – that's just silly!  

There's no "story" to this, it's a blue-chip stock that's been in business 100 years and will likely be in business 100 more and Amazon doesn't hurt them because they are not a retail store – they just supply stuff that retail stores sell – including Amazon.   The drop from $60 was caused by a combination of higher transportation costs and fears of rising labor cost and raw goods costs that, so far, have not materialized.  

Also, the company stretched out, buying Blue Buffalo pet food for $8Bn, which was 25x their $329M earnings so WAY higher then GIS's valuation but GIS sells $16Bn worth of stuff and has fantastic distribution so I think they will quickly squeeze another $200M out of Blue Buffalo, which would grow their earnings 25% to perhaps $2.65Bn and even applying a 12x multiple to that gets us to $31.8Bn, 20% higher than the stock is now.  

We don't have to shoot for the moon here – or even $60.  Let's go for $47.50 (10% higher) with the following spread:  

  • Sell 10 GIS 2020 $42.50 puts for $3.90 ($3,900) 
  • Buy 15 GIS 2020 $40 calls for $6.50 ($9,750) 
  • Sell 15 GIS 2020 $47.50 calls for $2.85 ($4,275) 

The net cost of the spread is $1,575 and, if all goes well, at $47.50 or higher in Jan 2020, the spread will pay $11,250 for a gain of $9,675 (614%).  If GIS is below $42.50 you do have an obligation to buy 1,000 shares of the stock for $42.50 but the margin requirement should be only about $2,000 and you would take the loss and sell – not buy all that stock (even though it would be great to own, long-term).  

As noted above, it would be great if GIS goes up and up and we make 614% in 18 months in our sleep but you can't expect that.  The idea is just to have a diversified group of good, conservatively-targeted trades in solid companies that COULD make ridiculous amounts of money and, usually, some of them will and a 614% winner can pay for a lot of losers along the way so, in the end, you are very likely to come out consistently ahead!  

Once again, the chart makes it look like we had the results before we made the trade but, at the time, GIS was heading lower and we simply made a value call at what we thought was the bottom of a silly sell-off.  While it's up less than 10% since our call, the options give us huge leverage (yet still a very manageable downside) and already the short puts are down to $3.15 ($3,150) as the panic subsides and the bullish $40/47.50 spread is now ($7.85-$3.65) = $4.20 ($6,300) for net $3,150 which is already up $1,575 – exactly 100% in 2 weeks.  

That is just our FREE sample portfolio that we only adjust once a quarter, live on TV.  How do we do it?  FUNDAMENTALS!!!  

Image result for learn not to tradeAnother winning trading strategy we teach our Members is NOT to trade when you don't know what's going to happen because, even when you think you know, you're still going to be wrong about 40% of the time.  Of course, combining being right 60% of the time with good cash-management techniques we also teach our Members is a fantastic winning formula.

Today then, is a "no trade" day as Apple just had earnings and it's going to be up at the 5% rule ($199.50) and that will add 75 points to the Dow by itself and mask a lot of selling.  It's also Fed day and we'll be doing our Live Trading Webinar at 1pm, EST, which will be very exciting at 2pm.  AAPL is also the largest component on the S&P and it's 15% of the Nasdaq – so all 3 major indexes will be pushed up by AAPL but THEN, if they fail their strong bounce lines, we will get right back to shorting the indexs as there are not any Apples left to report and, we think, it's more likely to be downhill from here in August – especially with Tariff Talks ratcheting up again.

Be careful out there.


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  1. FU HBI!!!!

  2. Good morning, All!

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

  3. Good articles on buybacks:

    Perhaps the biggest issue with buybacks is that they avoid risk taking (and a binary, win/lose outcome) for those dollars. The data analytics guru Nick Maggiulli recently wrote that “the biggest risk you can take in life is taking no risk at all.” Corporate managers would do well to heed his advice.

    And where the money could have been better used for growth:

    Lowe’s, CVS, and Home Depot could have provided each of their workers a raise of $18,000 a year, the report found. Starbucks could have given each of its employees $7,000 a year, and McDonald’s could have given $4,000 to each of its nearly 2 million employees.

    That's money that would have actually trickled in the economy!

    Both by increasing inequality and reducing corporate investment, and thus productivity gains, buybacks might be bad for the overall economy, too. A high-inequality economy is one with less consumer spending and demand across the board, thus one with a lower GDP. A low-investment economy is a more sclerotic and less innovative one, and thus one with a lower GDP.

    The growth of buybacks and growing research on the perils they pose has increased interest in regulatory or legal action to bar or limit them. Tung and Milani argue that companies should be required, as they were before the 1982 rule change, to provide dividends rather than purchase shares with their cash. “Issuing cash dividends (regular or special) has a less predictable and manipulative impact on a company’s stock price—and thus is less prone to gaming by executives or activist investors for their own gain,” they write. “Dividends also do not have the same potential as buybacks to mask the market and balance sheet impacts of increasing executives’ stock-based compensation.”

  4. Good Morning.

  5. Phil / FTR – Can we get your view on FTR ?


    Quarter did not look like a problem to me….  Earnings a bit low, rev in line, paid down debt, cash flow is in line.  Next 12 months of debt looks like it can be covered.  What do you think is the catalyst needed?  Would you be buying any more here?  Shorts are still heavy into this, CFO should be named in the next 12 months…..

  6. What are your thoughts about HBI's earnings?

  7. ~~ CHK – Chesapeake Energy reports EPS in-line, beats on revs.

    CHK off sharply.  Sold some Jan $3.5 puts for .51.  

  8. abx under 11

  9. Interesting Play on Trump's favorit TWTR Jan 20 27/37 BCS for 4.20 and sell Jan 20 27 put for 4.10 and sell Aug 31 35 call for .70

  10. Jabo ABX will not come up if GLD does not go up!!!!

  11. I know Yodi.

    Pointing it out and wondering if now could be an opportunity.

    seems like a lot of our names have gotten clobbered since earnings. 

  12. Jabo I do have the sucker in my portfolio, but never look at it like a winner, possible fools gold?

  13. Phil / HBI – Air was in line, outlook in tact.  Loosing the Target C9 contract in 2020 ( appx $380 M of sales in last 12 months) is the key issue here.  Co says it will not affect their sales plans for this segment and given the runway they should be able to pick up new controllers in the time frame…..   What do you think?

  14. HBI The bottom should be looked at at 16.30. So todays 18.30 is not bad. I hold the Jan 20 13/18 BCS which is in good shape. Thrust my Aug caller at 24 will be money in my pocket.

    Wait till the dust settles, and keep on selling these cherries. At a div. of 3.3 % it even will look good for an armchair trade.

  15. As we discussed yesterday seem to be always the same pattern. TSN even the chicken come out to roost again.!!!

  16. TWTR is filling nicely

  17. F How low can you go. I thing we have to sell them some BMW, are they going to do the same trick than GM?

  18. It looks like AAPL's magic number is 203.46 to hit $1T MC.

    bitcoin would need to hit 47,619.05 which it probably won't do until 2020.

  19. Looking at my holdings I see lots are down even that /ES is up. Possible through AAPL shining today

  20. Phil,

    What is your sense of the near and intermediate future for LL? My data feed is down but if memory serves, sales were up modestly (5%) but on -going legal expenses tanked the qtr and, per the company, would continue to adversely affect bottom line numbers through 2019. Seems like prospects were brightening modestly but legal expenses cloud the outlook going forward. Stock continues under pressure or bottoms and recovers despite darkened (gray) outlook thru 2019?


  21. Good morning! 

    I think this is like The Emperor's New Clothes – LMT told Trump he was buying invisible planes and they pointed to an empty tarmac and got Trump to write them a $100Bn check – that's why they had such a great quarter!  

    Big Chart – No real danger yet but not good for RUT and NDX to get caught below their lines.  

    HBI/Jabob – Wow, pounded!  

    TGT dropped a Champion line but what they dropped what the exclusivity they were paying for – they're still going to sell them and now, so will everyone else.  Anyway, we timed it perfectly so a nice chance to get back in:

    Submitted on 2018/07/20 at 2:45 pm

    • HBI – Right on track but it's net $9,000 out of $12,000 so let's take it off the table rather than wait 18 months for 33% more money.

    Well, we do care because it's still in the OOP but it's the 2020 $18/23 bull call spread with short $15 puts at net $600 – kind of hard to worry about that and a nice chance to improve the position (only 10 long/5 short).  It was a penny miss, for Pete's sake!  

    Revenues: Net sales of $1,715.4 million rose 4.2% year over year. The Zacks Consensus Estimate was pegged at $1,711 million.

    Outlook: Hanesbrands reaffirmed its 2018 outlook. The company still management still projects net sales in the band of $6.72 million to $6.82 billion. Further, it continues to envision adjusted earnings in the range of $1.72-$1.80 per share. For the third quarter, management projects net sales in a band of $1.85 billion to $1.9 billion. Adjusted earnings per share are envisioned in a band of 54-57 cents.

    The Zacks Consensus Estimate for the third quarter and 2018 is currently pegged at 55 cents and $1.76, respectively.

    So you can curse at it or you can be rational and take the opportunity to buy a great stock that is sold off by the idiots that do believe that the price of the stock dictates it's value over time and not vice-versa.  

    Image result for stock market weighing machine

    Speaking of 3-time Stocks of the Year:  AAPL testing $200 which is $1,400 pre-split!  

    FTR/Batman – People are NUTS!  Their plan to generate $3 BILLION of free cash flow over the next 4 years is ON TRACK!  

    The company reported its results after the close on July 31, 2018.

    • Q2 revenue was $2.16 billion. This was down 1.7% sequentially and 6.2% Y/Y.
    • Operating income at $367 million was flat sequentially.
    • Adjusted EBITDA was $884 million, which was down sequentially from $908 million in Q1. The decline was attributed to seasonality, a reserve established for exiting a partnership, and storms. Adjusted EBITDA margin 40.9%.
    • Management reiterated their FY 2018 EBITDA target of $3.6 billion and adjusted EBITDA margins above 40%.
    • Net cash from operating activities was $672 million which was up sequentially from the first-quarter level of $251 million.
    • LTM free cash flow of $721 million, which was up 14% sequentially from $632 million in Q1. Management reiterated the FY 2018 target of $800 million.

    Net loss for the quarter was $72 million. EPS was -$0.92. Analysts were expecting revenue of $2.16 billion and EPS of $0.72.

    So after three consecutive beats, the company missed on EPS. It seems like the culprit might have been pension settlement costs of which there were none in Q1 and $25M ($19M net of tax) in Q2. On a YTD basis, actual earnings of -$1.50 still beat estimates of -$1.61.

    For the second quarter of 2018, net cash provided from operating activities was $672M and operating free cash flow was $351M. Over the four-quarter period ending 6/30, net cash provided from operating activities was $1.944Bn and operating free cash flow was $721M. For FY 18 (next 4 Qs), FTR expects FCF to be around $800M and you can buy the whole company for $400M at $5/share.

    CHK/Albo – Was a huge run, got a bit ahead of themselves. 


  22. HBI / Phil – You have me interested here and I was looking at the fundamentals (who does that right?) and there are some interesting numbers there. For example, their tax rate – in 2013 it was 16.5%, in 2017, 3.03%. Crazy right? Also, their long-term debt to capital went from 54% to 84% – is that the results of buybacks? That would explain the increased sales per share but with lower revenues. 

    I don't see them in danger and they have a nice div – like GE, an interesting income machine, but it seems that they are following the buyback trend which delivers little long term results as I posted earlier this morning.

  23. Phil, an educational question… Lots of your position seem to be ending in Jan 2020. What would be the strategy if we have a major correction (e.g, -20-30%) in Q4 2019 affecting most of our stocks? Would the approach be to simply take the stock given that the valuations at strikes of written puts should be not too bad?

  24. In a few friday AAPL 195 puts just in case this insane market has had enough

  25. Phil / FTR -I'm with you on this one…. they are hitting the plan…. and preferred now gone ( not sure exactly how much dilution on these).  I took a big GULP and double'd down this AM bought at just under 5, and am in at an average price of 6.6…  Hopefully they can bring in a strong Finance guy that knows how to maneuver the debt market.  The FCF and CF should improve.  I'm now looking for selling some short putters on my stock to tittle this down….  Possible the November 6 calls.  Hoping we get a rebound do 5.5 then look at short callers.

  26. FTR – I mean selling some short callers.

  27. Phil,

    I am holding:

    HBI P 17JAN20 15.00 (avg Cost $1.6, currently $1.32)
    HBI C 17JAN20 20.00 (Avg Cost $1.53, currently $1.85)
    HBI C 17JAN20 15.00 (Avg Cost $3.77, currently $4.22)

    Should I take the opportunity to adjust the trade? Maybe cover the short $20 calls and just bull it with naked calls + the short puts? Or should I just leave it alone since I am in the money anyway and be happy?

  28. This just in:  Trump asked General Kelly how the pilots can find their F35s?  

    ABX/Jabob – At $13Bn with 65M ounces of gold in the ground and debt now reduced to $5.8Bn (paid down $629M this month). 

    Production and guidance continue to be great and costs are under control:

    It's kind of like buying a business that's paying down the debt on a $81Bn asset but, of course, it will cost $58Bn to pull 65M ounces out of the ground so the anticipated profit at $1,250 is "only" $23Bn and, at 5M ounces a year, that's over 12 years so ABX will "only" clear $2Bn a year overall in the long run but, of course, they will take on more debt when they get a chance to buy another miner's assets the next time gold is cheap.  

    Barrick Gold downgraded at RBC, citing Acacia turmoil among five reasons

    TWTR/Yodi – I like that.

    F/Yodi – Crazy action on stocks this Q.  

    LOL BDC. 

    Things are topping out already, watch those bounce lines for shorting opportunities!  

    Nas is lagging thanks to AAPL but they won't hold it up forever so I like the /NQ shorts at 7,275.

    $67.50 – wow! 

    They should both bounce here so long on /CL at $67.50 with tight stops or if /BZ fails $72.50 – just for some quick cash.

    EIA was disappointing:

    • EIA Petroleum Inventories: Crude +3.8M barrels vs. -2.8M consensus, -6.1M last week.
    • Gasoline -2.5M barrels vs. -1.3M consensus, -2.3M last week.
    • Distillates +2.9M barrels vs. +0.3M consensus, -0.1M last week.
    • Futures -1.38% to $67.81.

    Honey Badger/Tangled – I should really stop trying so hard and just trademark everything I say.  

    LL/8800 – I haven't really been paying attention since we cashed out though they are getting interesting again at $20 ($550M) with 1Bn in sales (up 10%) and no profits but, in 2014 – before all the nonsense began, they made $65M on the same sales.  There's also tariff issues which make them a bit of a stay-away at the moment.  We loved them at $10 – because it was ridiculously cheap but we took $30 and ran last year after taking 1/2 off at $20 so it's not really where I want to re-invest.

    HBI/StJ – Whenever I see taxes below 15%, I balance them up because I don't want to assume people get away with that forever.  HBI has been buying back $400M a year for the past 4 years from what was an $8Bn market cap (now $6.5Bn) so, as usual, money wasted and debt climbed from $1.6Bn to just under $4Bn so yes, mostly the idiots borrowed money to buy their own stock for top Dollar – otherwise I'd like them a lot more.  On the other hand, they would say they got to borrow at stupidly low rates and what else can they do as it's a very boring, very steady business so buying back stock is a riskless use of cash and cash flow while buying another brand is not likely to give them more shelf space and risks management's jobs (look what happened to GIS when they expanded into dog food with their money).

    Year End 30th Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 4,526 4,628 5,325 5,732 6,028 6,471 6,563 6,770 6,887 +7.4%
    Operating Profit $m 440.1 515.2 564 595.1 775.6 723.1 747.9     +10.4%
    Net Profit $m 164.7 330.5 404.5 428.9 539.4 61.9 70.7 639.7 682 -17.8%
    EPS Reported $ 0.58 0.81 0.99 1.06 1.40 1.41 1.44     +19.5%
    EPS Normalised $ 0.58 0.81 0.99 1.06 1.40 2.29 2.05 1.76 1.91 +31.6%
    EPS Growth % -5.1 +40.0 +22.2 +7.2 +31.4 +64.1 +37.9 -23.1 +8.56  
    PE Ratio x           9.71 10.9 12.6 11.6  
    PEG x           n/a n/a 1.47 1.37

    Rock-steady $6-7Bn in sales dropping 10% to the bottom line for $6.5Bn – it's a nice ROI but sexy?  Not at all (like their underwear).  

    2020/Alter – That's only because there are no 2021s yet.  We have hedges in our portfolios (and the STP hedges the LTP) and usually, if there's a big correction, we cash in our hedges and use that money to buy more long-term positions at discounts.  It's just the normal market cycles – not that we've been very normal this decade.  

    Let's say I have a $700,000 LTP and a $200,000 STP and the STP has about $75,000 worth of hedges that will make $225,000 on a 20% market correction.  The LTP will probably lose about 40% ($280,000) on a 20% correction because it's leveraged (assuming we sit there like idiots and don't adjust).  So, what do we then have?  We have a $420,000 LTP and a $425,000 STP and we're down $55,000 overall but then we can take our STP cash and double down on the entire LTP as 40% lower prices so we take $280,000 from the STP and DD on the LTP losing positions and now we have a $700,000 LTP and a $145,000 STP (and less inclined to hedge heavily) and, if the market recovers 20% we have $840,000 + $100,000 (assuming some hedging losses) for $940,000 DESPITE a 20% correction along the way.  

    In very simple terms, if the market drops 20% and you only lose $55,000 out of $900,000 (6%), then you have already won.  Even better, you have a ton of cash and you are positioned to buy while others are illiquid and panicking so, rather than fear a 20-30% correction – we kind of hope for it.  Just like our man Buffett:

    Image result for buffett fear greed

    Unfortunately, you kind of have to go through these cycles to see how the system actually works and that can take many years to get practical, real-life examples – though we do it with individual stocks all the time as we scale into a sell-off.  

    Damn, I missed $67.75 on /CL!  

    Also missing lunch – it got busy in chat recently!  

    Good plan Batman. 

    HBI/Martin – As a rule of thumb, unless I am dumping a stock, I like to roll down my long calls whenever I can for 0.50 on the Dollar.  The 2020 $15s are $4.30 and the $13s are $5.60 so I'd offer $1.20 and see if I get a bite or, if you want to be bolder, buy 1/2 more of the $15s which will leave you 2/3 covered and then wait for a bounce and sell 1/3 the Jan $20s (now 0.85) for $1.20 or better and then you are netting in for just $3.10 off that first sale with no danger at all to the upside and 2 more 6-month sales ahead of you.

  29. Where do companies, AAPL, put their cash?  Could they put it in fixed CD.  I have seen 3% ads for 2 year terms.

  30. Phil,

    Thanks for the LL eval.

  31. SODA

    Soda Stream up 10% to all time high.

    Who da thunk it ?

  32. Thanks, Phil, for the comments on 20-30% correction. Just a quick follow-up practical question. I use IB and they do not seem to allow (unless I miss it…) any sub-accounts etc. So, in their terminal view, it's not STP and LTP but just a single portfolio. So how do you guys maintain a separate view of the portfolios? Just tracking in Excel or are there are any tools you could recommend? For now, I am just using IB and their own trading terminal (TWS)…

  33. Without looking (I hadn't in years) I would've guessed SODA was around $25. Wow.

  34. AAPL/Mostly in bonds, that's another reason they wanted to force repatriation – it creates T Bill buyers for Trumps insane debt run-up.

    You're welcome 8800.

    SODA/Albo – Not me, seems like a fondue pot kind of fad but it keeps going.

    Separate view/Alter – I use PowerOptions @ – tell them I referred you and they'll give you some free stuff!  

    Webinar time!  

  35. What up with ALB down today ?

  36. thatway/AAPL – CD's are mostly attractive due to FDIC insurance which is mostly for individuals and is capped super low ($250-500k). They probably follow the simple short term yield strategy (treasuries around the world). Vanguard's money market fund currently yields 2.08% and is probably a good retail approximate for the yields AAPL and others get when parking cash.

    I see on schwab 1 year CD's topping out at 2.45%, 2 year at 2.8% and 3-year at 3%. Where are you seeing a 1-year at 3% because I'm interested.

  37. Chris, thatway wrote, "I have seen 3% ads for 2 year terms."

  38. oh i see, I googled and found a 3%, 2-year term CD (with a $10k minimum) as well

  39. That was a good webinar – ended up +$1,000 trading the Futures.

    I took the money and ran on /YM at 25,335 (+$235) as I have to catch up on comments now and /RTY may top out at 1,670 but, if not, that's the fresh horse over that line with tight stops below.

    ALB/QC – I don't see anything and earnings are next Tues.

    Indexes not at all impressive considering AAPL is adding 85 Dow points and probably 8 points to /ES and 0.75% to the Nasdaq (15% of 5% – easy math) 

    3% – Well that's a sure sign the Fed is completely BS'ing about low inflation – people are already paying 3% for short-term money.

  40. FTR/Phil- seems on track to what we expecting but I am just wondering what's stopping you from DD now?

  41. Phil / Tesla,

    Any final thoughts before the earning seems like everyone at this point is short on the stock or running stories related to shorting the stock but I am curious to see if Elon can pull a rabbit out the hat this quarter. Any way you are playing the earnings ? Apologies if I missed any earlier plays but I have covered some of my earlier shorts and hoping for a bounce to short it again but not to optimistic about a pop this earnings report.

    Thanks as always


  42. FTR/Dave – Not feeling good enough about the markets to DD on things just yet.  No matter how much I like FTR or HMNY, they are still long shots from a Fundamental standpoint as they have issues.  

    Speaking of HMNY – was WAY too easy to buy 4,000 more shares for $1,000 (the same $1,000 I made trading in the Webinar, to provide a sense of proportion).  Not much competition from other buyers.  

    TSLA/Pat – I like /NQ short at 7,280 because TSLA might be the straw that breaks the Nasdaq's back.  Too scary to bet on them directly though.  

    TSLA will probably lose $2Bn and if they lose less than $1Bn, I might change my mind about them but, for now, I predict DOOM!!!  

    QQQ Friday $177 puts are 0.95 so about 0.80 premium, which is a lot but, if TSLA misses, we could see a $5 drop in QQQ and those puts would be $5+.  I think the real risk is more like 0.50 as we should be able to get something back if the Nas goes higher (the delta is 0.50) so let's play TSLA short by buying 50 QQQ Friday $177 puts for 0.95 ($4,750) in the STP.  In theory, we're risking $2,500 to make up to $20,000.

  43. A little selling into the close – interesting…

  44. Probably trade talk concern, Trump is back to saying 25% tariffs on $200Bn worth of Chinese products.  

    Make sure you have those hedges in place!  

    25,300 again on /YM – glad I took the quick money.  

    /NQ still 7,281!

  45. tsla

  46. Trump administration attacks Obamacare with another "low cost" alternative of temporary insurance that doesn't actually cover anything to pull more people off the Obamacare rolls, perpetuating this insanity.  

    WYNN with a big miss.  No surprise with all the chaos over there.  

    Trump's half-empty rally in Tampa with the rabid crowd attacking the media for showing empty seats:


    TSLA loses $3.06/share (about $1Bn) on $4Bn in revenues, gross margin 21% is very good.  Say they have "repeated weekly production" of 5,000 multiple times – that's actually very good.  Says they will be profitable at some point but, oddly, no specific point.  $2.2Bn in cash available. 

    This sound pretty good – I guess I'll take quick profits on /NQ (7,270).

  47. Curious to know how they increased the available cash

  48. any thoughts on WYNN for a bounce

  49. Trump rally / Phil – You will see, one day a reporter will get hurt and Trump will claim total shock!

  50. $739M negative cash flow – also very good considering.  Here's the letter

    Of course, keep in mind they are only selling very expensive, tricked-out versions of the model 3 and it's very unlikely there will be a sustainable market for the $64,000 version (yes, I checked!) of the car but he certainly pulled it off for the Q.  They're back over $300 but still losing at a $2Bn/yr, which is what they have in the bank but at least it's not in imminent danger of collapse.  

    During the month of July, we have repeated weekly production of approximately 5,000 Model 3 cars multiple times while also producing 2,000 Model S and X per week. Having achieved our 5,000 per week milestone, we will now continue to increase that further, with our aim being to produce 6,000 Model 3 vehicles per week by late August. We then expect to increase production over the next few quarters beyond 6,000 per week, while keeping additional capex limited.

    We believe that increasing capacity by improving utilization of our existing lines and making selective improvements to address bottlenecks rather than creating entirely new duplicated lines will be the most capital efficient approach. We aim to increase production to 10,000 Model 3s per week as fast as we can. We believe that the majority of Tesla’s production lines will be ready to produce at this rate by end of this year, but we will still have to increase capacity in certain places and we will need our suppliers to meet this as well. As a result, we expect to hit this rate sometime next year. 

    What a nice way to say they are losing their Federal Tax Credits:

    Demand for Model S and Model X vehicles remains high, with Q2 2018 being our highest ever Q2 for Model S and Model X orders. In July 2018, we delivered our 200,000th vehicle in the US, which means that our US customers will have access to the full $7,500 federal tax credit until the end of 2018, at which point it will phase out over the course of 2019. 

    The energy storage is more exciting than the autos:

    In May 2018, our energy storage business reached a significant milestone when we finished deploying 1 GWh of energy storage worldwide since the inception of our business. Having reached that milestone after less than 5 years, we are now aiming to repeat it with another GWh of energy storage deployed in just the next 9 to 12 months. Utilities and energy companies are quickly realizing the benefits of battery storage. According to third-party research, since we deployed our 129 MWh Powerpack project in South Australia, grid maintenance cost declined by 90%. This has been achieved due to the battery’s instantaneous response to electricity demand from our energy storage deployment. We continue to receive substantial interest for energy storage products from residential as well as commercial customers. In Q2, energy storage deployments grew to 203 MWh, an increase of 106% from Q2 2017. During the first half of 2018, our energy storage deployments were 450% higher compared to the same period last year. Our goal is to triple energy storage deployments in 2018 compared to last year

    We updated our Tesla app in Q2 to show the benefits of our solar + storage solution to every Tesla vehicle owner after a single swipe on the phone. We continue to see substantial cross-selling potential between our vehicles and energy products, and we now have over 80 Tesla stores in the US that offer our energy products. In Q3, this offering will expand outside of the US, as well. We are steadily ramping Solar Roof production in Buffalo and are also continuing to iterate on the product design and production process, learning from our early factory production and field installations. We have deployed Solar Roof on additional homes in Q2 and are gaining valuable feedback from each new installation. We plan to ramp production more toward the end of 2018 and are working hard to simplify the production and installation process before deploying significant capital into factory automation.

    As I said, losing less than $1Bn and I'm warming up to them a little bit.

    Still, you have to read their reports SO carefully:

    With the adoption of the new revenue recognition standard starting January 1, 2018, lease accounting generally applies only to vehicles directly leased by us without using bank partners. As a result in Q2, only 6% of vehicles sold were subject to lease accounting. This is also a function of growing Model 3 sales that were all cash. 

    That's a MASSIVE change in accounting, recognizing a lease now as a full sale instead of revenues over time pulls a ton of revenues forward and give a very misleading growth picture.  

    Still, he may have actually pulled it off – if what they say in this letter is true.  That doesn't mean they are worth $50Bn, of course, but $150/share – sure.  

  51. WYNN/Coulter – Remind me tomorrow and I'll look it over. 

  52. TSLA flying!

  53. Wow, up 10% – glad we didn't bet directly against them. 

  54. bloom energy: negative gross profit. That's a new one.

    What do they do, buy $0.80 from someone for a dollar?

  55. Disney – hmm, there's an article on Yahoo News bashing Disney cruises, yet Phil seems to always enjoy them. Hmmmmm.

  56. Swedish royal jewels stolen by thieves who fled by speedboat

  57. Trump administration cites safety to freeze mileage standard

  58. Inflation, gas prices, tariffs squeeze consumers

  59. Donald Trump is averaging 7.6 mistruths a day

  60. The Bottom/Anyone - How do you determine when a bottom has been reached?   

    I was in TSN before the drop from $64.  It is a patient play, so while waiting, I would like to sell some Oct puts @ $4 to fund some LEAP 2020 Jan 60 Calls, wait to cover.  thoughts?  

  61. TSLA is looking for suckers to support a manufacturing plant in Europe. Wooing Germany especially.

  62. Death Valley Just Posted The Hottest Month Ever Recorded Anywhere on Earth

  63. A Tea Party Movement to Overhaul the Constitution Is Quietly Gaining Steam

  64. Good morning!

    Nice little dip off tariff talk – again.  We'll see if it lasts.