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Non-Farm Friday – Is America Working?

Wages.

That's what it's all about today as we get the Non-Farm Payroll Report at 8:30 this morning.  Average Hourly Wages have been on a 2.7% growth path for the year and it would be surprising then, if we are below 0.2% or above 0.3%, which is the Fed's sweet spot.  The closer we are to 0.3%, the more likely the Fed is to hit the brakes before rising wages push inflation out of control (and eat into Corporate Profits – which we really can't have in this country!).  The Dollar has been flirting with the 95 line and more wages means more demand for Dollars to pay people with but the Dollar over 95 can put downward pressure on the indexes, as well as commodities.

The best short on a strong Dollar this morning would be oil (/CL) at $69, with tight stops above and we don't want to be greedy into the weekend but every 0.25 drop pays $250 so we can make some quick Egg McMuffin money on Dollar strenght.  If there are more than 250,000 jobs created (doubtful), that would be a plus for oil as more jobs, in theory, means more people driving and more factories using oil for whatever (trucks too) – so watch out for that.

On a stronger Dollar, Silver (/SI) makes a good short as it tests the $15.50 line.  We have been long on /SI but it popped nicely so now we take that profit off the table as we expect a pullback – even if it is on a run above the line (where we stop the shorts out over). 

These are simple, mechanical moves you can make on events where the Dollar is in play and no event is bigger than Non-Farm Payrolls – other than a Fed meeting and this week's was a big nothing – so we have to have a little fun before the week is out!

Despite rising wages, Consumer Credit has been rising at an alarming rate and that's something we'll pay attention to in next week's report as, last month, Consumer Credit jumped $24.5Bn, which is a pace to put Americans $300Bn more in debt for the year, a 7.5% gain to the $3.7 TRILLION mark.  That's really not a good statistic when interest rates are set to rise (about 1/3 is revolving, credit-card debt that rises quickly).  

Image result for us consumer debtConsumer Debt matters along with wages because, when debt rises faster than wages, Consumers eventually run out of money and are forced to stop borrowing and then the whole house of cards comes tumbling down and, as you can see from this chart, we're well past the peak we hit in 2008 but we only had 140M people working and now we are at 162M so that's up 22M jobs (15%) so, if we topped out at $1Tn in 2008, we should be able to hit $1.15Tn now – before the economy collapses and we're only at $1.1Tn so – PARTY ON! 

8:30 Update:  Oops, payrolls came in a bit shy at 170,000 and that's not good since we had 325,740,830 people in the US last July and, despite Trump's best efforts to kick them out, we have 328,273,764 as of this morning so that's 2.5M more people who need jobs, which means 200,000 jobs a month is the MINIMUM we need to have a healthy economy that keeps up with population growth.  Despite all his claims of "miraculous" job growth and "best ever" well, everything – Trump has, for the past two years been anemic in actually creating jobs only managing to get over 200,000 on 7 out of 18 reports (39%) and they were not enough to make up for a couple of horrific misses, so the average is just 176,000 jobs per month – a net LOSS of employment to population for the President:

Meanwhile, wages are still rising on the high end (0.3%) and that means employers are not hiring but paying 2.7% more for the same jobs they were filling last year.  That would be squeezing margins but, fortunately, you can't tell because it's offset by Trump's $3Tn in Tax Cuts to our Top 1% Individual and Corporate Masters.  I think, when they passed the bill, they said something about it leading to more job creation but maybe they meant in the afterlife because it's been a year and June was worse than last June and July was worse than last July and this trend is not our friend…

So no go on oil – it did dip to our $250 but that's all we're going to get out of that as the Dollar is heading lower (94.84) and /SI is right at $15.49 so no short there either but Gold (/YG) is still down at $1,224 so that's a good long if /SI does pop $15.50.  As to the indexes, we expect a bit of a pullback today as there's nothing exciting in the US economy and AAPL is likely to pull back a bit from the $1 TRILLION mark and 7,400 is ridiculous on the Nasdaq 100 (/NQ) – especially when you have signs of the economy slowing down.

We've done very well shorting the Dow (/YM) at the 25,300 mark, so why stop now?  Tight stops above, of course, but the potential rewards far outweigh the risks on that one as does 2,830 on the S&P (/ES) and 1,685 on the Russell (/RTY). 

The indexes are at record highs but the economy is struggling and, in case you forgot, we're in the middle of an escalating Trade War with the World's 2nd largest economy – might be a good idea to be a bit more cautious, right? 

Have a great weekend,

- Phil

 


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  1. Good Morning.


  2. Phil/ NQ- are you still short from y'day?


  3. Rick Santelli is probably going on right now gushing over the 170,000 jobs saying that Obama never got over 100,000! And not mentioning the labor participation rate which he used to bring up each month for 8 years to temper any good number!

    In the meantime, we have added $2T to our debt over 10 years with the tax cuts to get 170k jobs created each month! That's $200B per year or $17B per month. So each job is costing us close to a $100k each month. Might as well write a check to these  guys as it's probably 3 years of income for these new jobs!


  4. Speaking of salaries:

    http://ritholtz.com/2018/08/companies-pay-workers/

    Financial companies with zero employees seem to pay the most!


  5. I have not heard a word from ric santelli's pie hole for years now….


  6. AKS

    Despite reporting a good quarter and a good forecast AKS is down some 17%.  Sold more Jan puts. Third time I've gone back to the well this year.  Very profitable little spec.

    30-Jul-18 16:51 ET

    AK Steel beats by $0.01, reports revs in-line; expects Q3 margin improvement  (5.36 +0.11)

    •Reports Q2 (Jun) earnings of $0.22 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus of $0.21; revenues rose 12.2% year/year to $1.75 bln vs the $1.75 bln Capital IQ Consensus.
    •"We expect that the continued strong business environment will result in improved performance in the second half of 2018 compared to the first half and position us well for resetting a majority of our annual contracts later this year."
     


  7. AKS / Albo – My only fear with these steel and aluminum guys is the uncertainty with the tariffs. That must be helping them right now, but what happens if these tariffs go away.


  8. HBI – The downgrade police are hitting – yesterday and today….


  9. STJ – I think AKS is pricing that in.  Hope I'm right .


  10. Bat HBI is up on opening .15 ?????


  11. ACIA – Up sharply.  Other fiber optic stocks up.  Even our favorite laggard, FNSR.


  12. Good morning!  

    Not much reaction to NFP miss – not that any single teport is a big deal but we are downtrending while wages keep rising – it's not a good sign.

    /RB now up 0.04  from our entry so you are officially greedy if you are still in it (I took the money yesterday)!  

    /NG plowing higher too:

    Ouch!  

    As noted above, /YG is lagging:

    Big Chart – AAPL broke the Nas back over the 20 dma and the RUT is over too so nothing bearish unless they (and they NYSE) fail.  On the other hand, everyone is close to a line so nothing too impressive here. 

    /NQ/Ravi – Sadly yes, still tilting at windmills.  Indexes heading higher at the moment but, as we know, China takes their time retaliating and I just want to have my shorts on when it finally hits the fan…

    Write a check/StJ – Sadly, efficiency is not their goal.  What's actually going on is they are paying Top 1% employers $100,000 per month for each $5,000 job they manage to trickle out.  Things are going EXACTLY according to plan although, as noted above, those  170,000 jobs are not created – it takes 200,000 jobs a month just to keep up with normal population growth.

    Santelli/1020 – Consider yourself lucky.

    Oh wheeeee!  Glad I stuck with those shorts! 


  13. TSLA and AAPL giving some back.

    AKS/Albo – That's an ugly chart:

    I'm not a fan of their 1% margins.  $6Bn in sales to make $67M seems like too much work to me though they are only asking $1.4Bn for the whole company (20x) so not unfair at $4.45 and it would only take a very tiny increase in steel prices, like 5%, to give them a $300M (5x) pop in profits.

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 5,934 5,570 6,506 6,693 5,883 6,081 6,395 6,935 7,101 +0.5%
    Operating Profit $m -128.1 135.8 139.4 -211.2 230.2 220 161.1      
    Net Profit $m -1,027 -46.8 -96.9 -509 -7.80 6.20 -32.2 226.2 263.4  
    EPS Reported $ -9.09 -0.34 -0.65 -2.87 -0.034 0.12 -0.018      
    EPS Normalised $ -9.09 -0.34 -0.65 -1.68 -0.034 0.27 0.14 0.70 0.88  
    EPS Growth %             -72.3 +156.2 +25.7  
    PE Ratio x           16.2 32.1 6.32 5.03  
    PEG x           0.10 0.21 0.25 n/a
    Profitability

    And what StJ said!  

    HBI/Batman – Idiots.  I'm so tired of perfectly good stocks going out of favor and what passes for analysts these days piling onto the negative bandwagon (works the other way too).  So few people do real work these days because the pay is no good (anyone decent works for a fund or does private work) and no one actually tracks results – so what's the difference?

    A sad side-effect of the web is that it has destroyed accountability.  Of course, these reports don't take into account our ability to make PLENTY of money from a flat stock:

    Hanesbrands' stock valuation remains "undemanding" even after the initial 19-percent sell-off, the analyst said. The stock was trading at 9.7 times Barclays' 2019 earnings per share estimate, which represents a 34 percent discount versus its peers but a lack of positive catalysts should prevent investors from buying the dip. On the other hand, the steep valuation discount versus its peers also implies a limited potential downside from current levels.

    That's all we need to know to sell puts and buy a spread.   As I noted yesterday:

    • Sell 10 HBI 2020 $18 puts for $2.80 ($2,800)
    • Buy 15 HBI 2020 $15 calls for $4.20 ($6,300)
    • Sell 15 HBI 2020 $23 calls for $1 ($1,500) 

    That's net $2,000 on the $7,500 spread so $5,500 (275%) upside if HBI can get back to $23 in two years.  With 15 longs, as it recovers, we can sell 5 short-term calls for income like the Oct (78 days out of 533) $20s for $1 (now 0.30), which is the price of the $18s, so a move to $20 would do it.  That would return $500 maybe 6 times for $3,000 – a nice bonus while you wait.

    As long as HBI holds $18, the spread is $4,500 in the money for a $2,500 gain, which is "only" 125% but not terrible for a stock that flat-lines.  As long as we find a good bottom – we don't actually need the stock to go higher.


  14. Here some trades for you Sold AAPL Aug 31 @ 215 for 1.13 (putting my toe in it)

    Armchair trade HBI Buy stock at 18.00 to 18.05 and sell the Sept 18/19 strangle at 1.05, combined monthly return 3.82%

    Further I wish to remark on ETE an armchair trade I initiated 3/26 with a stock purchase of 14.12 with a Jan 13/15 strangle the 15 caller was called today. The putter should be closed and I will set up a new play. As you see sometimes even armchairs have to be adjusted. But what the hell they paid more for the stock than I paid for it and the strangle position is home and dry.



  15. Phil why do you have to beat me to the trade?


  16. Rep. Lou Barletta (R-PA)  =  Cheese whiz in a can….


  17. AKS

    Phil, I may be wrong, but looking at the chart, I see 4 or 5 good entry points this year.  And management is optimistic.  Also, only risking $3.65.  If stock gets put to me, I'll simply write some $4 calls.  It's worked so far  We'll see.


  18. StJ /wages

     

    In Europe, we are suffering job creation one way or the other (especially in the Mediterranean zone, (I assume is part of the Eurosclerosis that the whole European body suffers).

     

    There is a case involving HP investing in a new plant  that in certain moment Europe approved compensations and subsidies for establishing a new  unit in the south of Italy ( yes…the total cost per job "created" was superior to 1 million ..in the 90´s)

    And the plant closed a few years later.


  19. Yodi/Armchair/HBI

    I tried a setup with just selling 1 Sept 19 Call and 1 Sept 18 Put. I guess that is what the strangle means. My account does not have PM margin but the margin on this is around $300. So $105 for a $300 margin is good return for a month. What is the need to buy the shares? dividend? or in case the caller is executed?

    regards




  20. Jobs / Advill – No worries, we have the same schemes here! Wisconsin is offering billions in tax breaks to Foxconn against basically no guarantees that jobs will be maintained for a long time. It happens everywhere. Federal tax cuts are a different animal though…


  21. 1st year of Nevada marijuana sales exceeds expectations




  22. China announces $60B of US goods for tariff retaliation



  23. Yodi!  Phil was 9: 52 am…you were 9:59 !…. today he wins…lol,

     

    regards!


  24. Pat I always buy the Stock, it will increase your return especially if you go more than 3 month out, and or you have the stock for future plays. Further you selling the put as you are prepared to get ass. Just below 18 but what about the call, I do not like very much naked calls. You can also sell much further out strangles. See the ETE.


  25. Advill I was still typing!!!!! Hot enough for you there in Bacelona? 38 degrees here.


  26. StJ /wages, yes agree, in the Italian case the novelty was that subsidies involved the entire working life of a person and more… 

    In that particular case, the wage was less than $1000 (don´t remember it was still in Italian Liras),  but the subsidized scheme covered the whole life of the worker 2X times!


  27. GIS was discussed the other day good div. also good to initiate an armchairtrade.


  28. CHL – are we waiting to sell long calls here? are we going to roll?



  29. After investigating Clinton White House and Vincent Foster’s death, Brett Kavanaugh had a change of heart


  30. 33 C  at the moment so, not so bad, I just flew back from TX where we were  42 C!. (113F)  that's hot!.

    Where are you now?


  31. Aachen


  32. Job growth continues to slow


  33. BJO - Let's buy back the 25 short Sept $48 calls for 0.40 ($1,000) and roll our 25 Sept $44 calls ($1.05) down to the $42 calls at $2.05 for net $1 ($2,500) and see how that plays out before selling more short calls.  

    I did not roll down yet – would you still do the same roll here with BJO at 41.8


  34. Pat Further Armchair trades are plays where you have a stock div. more than 3% better 3.5 and 4 and over.

    Remenber in Opt. plays you do not get a div. and they have always a limited life time. If the company not goes under you do not have to sell the stock, as most do on a down draft. Wrong move!

    I play opt. on low or no div. payers. Obviously an option play is cheaper than buying the stock.


  35. Phil does it look TSLA is looking for 360? Do not forget the play I need it for Christmas!!!




  36. I surely hope you guys bought some PM and MO when they where in the dump. Looks like they smoking again! I still did have my old stocks and I am only adding more armchair trades. See my comment above, as I did not sell my stocks just because they were down. Actually I bought some more than at wholesale prices.


  37. IBM well well from 143 to 146 not to bad!!!


  38. IP for armchair for a new entry try to set one up and let me know


  39. HMNY…every day beating..DANGIT!!!

    Their CEO should be thrown in jail!


  40. ETE/Yodi – Great timing on that one:

    As to HBI – aside from that being yesterday, it was also our Trade of the Year alternate last time it was this low.

    AKS/Albo – Not disagreeing, just pointing out risk.

    /RTY staying down but others are still perky.  

    CHL/Coulter – Another one we just added to the hedge fund (also uncovered).  My notes to Doug were: They may get less per subscriber but China is smaller than the US so they are covering less area but they have 887M subscribers.  They have rich people who are as rich as our rich people and those people are willing to pay whatever for high-speed services.  China's Top 10% is 140M people – that's pretty much our top 40% so all as much as the US Middle Class and higher so why does CHL get "just" a $182Bn valuation with $16.5Bn in profits (p/e 11) while T is at $233Bn with $13Bn in profits (p/e 18)?  

    In the LTP, we sold 10 Sept $47.50 puts for $3.80 so we'll be rolling them and we have we own 20 Sept $40/47.50 bull call spreads at net $5,700 and $45 would pay back $10,000 – so all good there.  As a new trade on CHL (which is essentially what we'll be moving to this month), I like:

    Sell 10 March $45 puts for $2.70 ($2,700)

    Buy 15 March $40 calls for $5 ($7,500)

    Sell 15 March $45 calls for $1.80 ($2,700)

    That's net $2,100 on a $7,500 spread that's practically all in the money to start so return over $45 would be $5,400 (257%) in just 6 months.   Wow, that one has to be a Top Trade Alert, right?  Let's officially add that to the OOP and the LTP but we can do 20 short puts and 30 spreads in the LTP.  We will adjust the old spread (basically close it out) later in the month.

    BJO/Coulter – So far, so annoying!   Yes, it's still the same adjustment as the one we called on 7/20, when BJO was at $42.98.  It's $42.15 now, so cheaper to make the changes!  

    TSLA/Yodi – It's very hard to be patient and everyone was bugging me last time we were near $380 (where I really want to short).  Once we get over $360 I'd be inclined to start a small short and yes, it would suck to miss it.

    MO/Yodi – Also for the Hedge Fund.  Ultimately, they will win the Marijuana Biz but only when it becomes legal nationwide so, for now, we're investing in small pot companies.  

    We have MO in the LTP but just 5 short 2020 $65 puts at $10 and 10 long $50/65 bull call spreads at $5.50 so net $1,000 on the $15,000 spread that's just under $10K in the money but we'd lose $2,500 at $60 on the aggressive put sale so net "just" $7,500 is up $6,500 (650%) since March.  

    As a new trade, I'd go with:

    • Sell 10 2020 $60 puts at $7.50 ($7,500) 
    • Buy 20 2020 $50 calls at $11.25 ($22,500) 
    • Sell 20 2020 $60 calls at $5.40 ($10,800) 

    That's net $4,200 on the $20,000 trade that's essentially all in the money so all MO has to do is not go down and you pick up $15,800 (376%) in profits.  That's why we added it to the Hedge Fund!  

    HMNY/Jabob – Join in the lawsuit:  IMPORTANT SHAREHOLDER ALERT: The Schall Law Firm Announces it is Investigating Claims Against Helios and Matheson Analytics Inc. and Encourages Investors with Losses in Excess of $750,000 to Contact the Firm

    I'd be very curious to know how that goes from an insider.  


  41. Happy my losses are that large ;-(


  42. Phil, in CHL trade, what's the rationale for selling less puts than BCS? If they were, say, 10/10/10 each, then it would be far less "net" on the the same $7,500 spread… What am I missing here?


  43. /KC coming back (as usual).  

    Don't forget to scale back if you scaled in.  The idea is not to carry twice as much risk but to lower the risk basis and then get back to what you are comfortable with.  I'm back to 2 long on /KCN9 – now with a very low basis:

    There's no need to be greedy, these contracts pay $375 per Dollar and we expect to hit at least $140 so $7,500 per contract between $120 and $140 by next summer.  The risk is being long on coffee at the the long-term lows.


  44. CHL/Alter – I generally keep the risk in-line with what I find acceptable for the portfolio.  If you get assigned 1,000 CHL at $45, that's $45,000 so $22,500 in a $100,000 portfolio with $200,000 in buying power is PLENTY of exposure to one stock.  The LTP is $500,000 (now about $680,000 though) so we can have more there but still – I'm not so adverse to using my cash to make 257% in 6 months that I feel the need to increase my risk by 50%.

    Obviously, by the way, I don't think CHL is going to $0, which is why I don't mind the "risk" of being assigned a big chunk of a $100,000 OOP, where we wouldn't REALLY want to own so much of the stock.  Figure the actual risk is CHL dropping 20% to $37 and our 10 short $45 puts would cost us $8,000 to cancel out, plus (assuming we sit like idiots without adjusting) our $2,100 would be lost to so the real risk here is $10,000 to make $5,400 which is 50% in 6 months – still acceptable but I wouldn't want to do it if my return on risk was 25%, right?  

    In the LTP, 20 is small enough that we'd be fine rolling and doubling down so even less fear in that portfolio of having a problem with this trade.  


  45. Told you not to be greedy with /RB!  


  46. Hi Phil,

    Any thoughts on SRCL? Hit after earnings yesterday… has come down quite a bit.  Worth a shot or is this a dog with fleas? Thanks


  47. SRCL/Sun – No thoughts at all as I don't follow them but it's a nice, boring business with little or no growth that CLAIM they are going ot make much more money now on the same sales but, so far in Q1, they made the same $22.5M they've been making on $900M in sales so I'm not sure when the magic happens to justify what is now a $5.2Bn market cap.  Even when things were good, they made, at most, $300M (10%) on those kinds of sales.  I think this fairly priced for them, even generous still at $60. 


  48. Thanks!


  49. Taking another shot a /YM at 25,400 now – short with tight stops above.  

    Data doesn't seem to matter but whatever, right?

    • UK service sector activity slowed in July to 53.5 from 55.1 in June, compared to the reading of 54.7, highlighting that business activity rose at the slowest pace since April, while job creation was the weakest since August 2016.
    • The Bank of England raised interest rates despite deepening worries over Brexit, but indicated that any more hikes will be at a “gradual” pace.
    • The bank said it raised interest rates because the economy has recovered from its slowdown at the start of the year, but warned that Brexit could damage the recovery.
    • Eurozone composite final PMI fell in July to 54.3 from 54.9, matching an earlier preliminary estimate, indicating that the economy started quarter three on a softer footing.
    • Eurozone business growth was sluggish at the start of the third quarter as expected, hampered by a drop in new orders that sapped private-sector optimism, a survey showed on Friday.
    • Eurozone final PMI fell to 54.2 from 55.2, below an earlier flash reading of 54.4.
    • Total U.S. rig count fell by 4 to 1,044 after rising by 2 last week, according to the newest weekly survey from Baker Hughes.
    • Packaged food stocks are riding on the back of Kraft Heinz (KHC +8.9%) after the company posted a solid earnings report and is back in the middle of M&A speculation again. There was also positive news delivered today by TreeHouse Foods (THS +2.7%) in the form of a beat and raise and Post Holdings (POST +8.1%) with its new private-label business structure.
    • Gainers include General Mills (GIS +3.7%), Kellogg (K +3.9%), Campbell Soup (CPB +3.4%), Flower Foods (FLO +3.3%), Hostess Brands (TWNK +2.6%), J.M. Smucker (SJM +3.9%), Conagra Brands (CAG +1.8%), Pilgrim's Pride (PPC +4.4%), Amira Nature Foods (ANFI +3.8%) and SunOpta (STKL +1.5%).
    • Take-Two Interactive Software (TTWO +10.5%) is moving significantly higher and tagged an all-time high in today's regular session after yesterday's Q2 revenue beat and raise, and with analysts praising the report ahead of a key catalyst ahead.
    • An Oct. 26 release of Red Dead Redemption 2 is getting closer, and despite the boosted guidance, Piper Jaffray still thinks the company's conservative. Recurrent spending and full-game downloads are among components that can drive estimates in coming years, analyst Michael Olson says; he's Overweight on the stock with a $145 price target vs. current price of $125.17. (h/t Bloomberg)
    • Benchmark sees 25% upside in a $156 price target. Digital and recurrent spending easily topped expectations and there's "over enormous near-term earnings power that should greatly exceed consensus."
    • "Everything is working" as the company shores up communities around its Grand Theft Auto and NBA 2K franchises, Jefferies' Timothy O'Shea says: "While it is still early, we believe Red Dead is the game to beat this holiday and we want to own this stock leading up to its big Oct. 26 launch." He has a $145 price target.
    • MoviePass is still alive and kicking even as the share price of parent Helios and Matheson Analytics (NASDAQ:HMNY) trades now at $0.11.
    • A MoviePass release last night seemed to pitch the case to industry players that its concept is needed in the exhibitor sector to maintain box office traffic.
    • "We believe as much as 6 percent of the industry’s total box office receipts can be traced to our loyal subscribers," reads a MoviePass statement.
    • "It’s clear that because of MoviePass, more people are seeing more movies at fair prices. Instead of wishing us away, the industry, particularly the independent film producers, should be congratulating and supporting us," notes the company.
    • While investors trying to buy into the HMNY decline have been scorched, there's a sense that the MoviePass brand could survive under a new financial operating model. Will we be talking about MoviePass in a year?
    • Groupon (NASDAQ:GRPNdrops 7.2% premarket on Q2 results that missed EPS and revenue estimates with revenue down 7% Y/Y. FY18 guidance has Adjusted EBITDA from $280M to $290M.
    • IBM impact: Excluding any amounts related to the IBM litigation, Groupon anticipates FCF of $200M in FY18.
    • Q2 gross profit was $323.7M. North America gross profit decreased 6% to $219.4M. Local gross profit fell 8% to $165.3M. Goods gross profit increased 4% to $37.8M. Travel fell 8%.
    • International gross profit was up 11% to $104.3M. Local increased 8%, Goods was up 28%, and Travel decreased 11%.
    • Net loss from continuing operations came in at $92.3M. Adjusted EBITDA was $56.2M.
    • Operating cash flow was $212.4M for the TTM and FCF was $145.2M in the period. The company ended the quarter with $662.9M in cash and equivalents.
    • Global units sold fell 10% to 40M. North America units were down 14%.
    • Earnings call is scheduled for 10 AM Eastern with a webcast available here.
    • Previously: Groupon -7.4% as IBM wins $82.5M patent case (update) (July 27)
    • Previously: Groupon misses by $0.01, misses on revenue (Aug. 3)
    • Update with guidance from the earnings call: Q3 has downside revenue at $600M (consensus: $604.48M), gross profit from $315M to $320M, and Adjusted EBITDA in the high $40M range.

  50. Crypto: Empowr coin showed up on the radar. Decentralized facebook pradigm. Whitepaper seems to have some ambitious goals. It's free to sign up.

    I signed up and have $41.40 to show for it, whatever that means. Friend me if you sign up!


  51. Here an other Armchair for Oct MPC buy the stock at 78.77 and sell the Oct 75/82.5 strangle for 4.20 combined return 2.27% per month. Ex div 8/15.


  52. Phil / AAPL – Looking strong into he last hour.   BRK has earnings announcement this weekend.  I assume he is still buying this.  If he is, there will be more buying in here next week.   If this happens I don't see this pulling back next wk.   In the 208 —> 192 pullback from yesterday…. did you take this into account?


  53. Phil / NLY – Creeping up to 10.6 – any short call to sell against this?


  54. Yikes, what a dull day…  Maybe I should take Friday's off instead of Mondays, which I hardly take off anyway… 

    Actually, I'm on vaca next two weeks.  Next week I'll be at Disney so one or two park days but, otherwise normal (there's only so much standing in lines I can take).  Week after I will be on a cruise so I'm sure I'll have 2 or 3 short days out of the week.

    ISM services were REALLY bad:

    How Your Brokers Can Make 10 Times More on Your Cash Than You Do It pays to pay attention to what your brokerage is doing with your cash. via

    Nasdaq could plunge 15 percent or more: Morgan Stanley's Mike Wilson

    ROFL:  http://www.cc.com/shows/the-daily-show-with-trevor-noah/trump-twitter-library

    The NRA Says It’s in Deep Financial Trouble, May Be ‘Unable to Exist’ – Rolling Stone

     Good article:  A self-identified democratic socialist and member of the Democratic Socialists of America, Ocasio-Cortez has become a political celebrity of sorts since her win—and on Aug. 31, she did not shy away from remarking on how her life changed overnight.

    It is hot out there!

    Interestingly, TSLA's CDS's keep going higher despite "great earnings".  That's an implied 40% risk of default.


  55. AAPL/Batman – No did not take BRK making some announcement but I doubt they bought more AAPL if it was going higher since he bought the first round.  Buffett buys like I do, scales in with a "small" position and buys more if it gets cheaper – rarely chases.  More likely they are buying something new like ALK or HBI, which would be right up his alley.

    NLY/Batman – Really, you think we'd better jump on the move from $10.40 to $10.60 and lock in the 0.20?  My short put target is $12 in 2020 so I'm not quite there yet.  Earnings were good and the only weak spot was Interest Income – which will improve with higher rates.  0.30 share puts them ahead of the track to make $1.15 for they year for a $10.55 share that pays out another $1.20 in dividends.  Why would I want to let someone take that away from me for $10 in exchange for 0.70 (the 2020 $10 calls)? 

    That's why they are my favorite REIT and I certainly think they are a great deal at $10.56, or you can just sell 2020 $12 putts for $2.40 to net in for $9.60 if you want a cushion.


  56. Damn, Dow popping 25,400 again.  /NQ testing 7,400 too.  /ES up at 2,840 but /RTY still can't get over the strong bounce line at 1,675.  So mixed – I guess…

    Still want to short on crosses back below those lines – if we get them.


  57. Phil/NLY,

    do we have them in OOP?

    regards



  58. NLY/Pat – No because we had less cash than I wanted to tie up but very appropriate for a portfolio like that as it's good for a nice 20% between dividends and short calls/puts.  


  59. GPRO having a good day on our earnings play:

    Submitted on 2018/08/02 at 3:49 pm

    Earnings/Soma – I like GPRO down here as they beat last Q and sold 30M cameras (since 2009) and Jackie bought a knock-off and declared it total crap and then got the Hero and is thrilled with it.  They are pulling in $1Bn and most of their losses have been over R&D misses like drone systems.  They will still lose money, but probably less than 0.25/share and that's pretty good progress.  What I like about GPRO isn't the mass-market cameras but their $50,000 Professional Systems, where they are the king of the market by a wide margin.  

    We sold 20 2020 $8 puts for $3.75 back in Jan and they are now $2.70 so we're up a bit and I still like the target.  You can sell those to pay for the $5 ($1.85)/$8 (0.80) bull call spreads at $1.05 so let's say you did 3 longs for each short and it was 30/10 (net $450) on the $9,000 spread so 1,900% upside potential at $8 and worst case is you own 1,000 shares for $8.45/share.


  60. Taking an aggressive short put like that GPRO spread allows you to make quick profits, even on a long-term play.  The 2020 $8 puts are now $2.15 ($2,150) and 30 of the $5 ($2.85)/8 ($1.40) bull call spreads are $4,350 for net $2,200, which is already up $1,750 (388%) in a day but just "on track" for the full $8,550 gains expected.  


  61. Phil:  NYCB is at the year's low.  Do you still like them? There is a .17 dividend coming in a few weeks.  S&P has a sell recommendation on them and a price target of $9.  Your thoughts?

    Here is an excerpt from the S&P report dated June 22:  

    NYCB reported pre-provision net revenue of $292.7 million (ex. securities sales), was 10% lower than a year ago. Net interest income declined 8% despite average earning assets increasing 2.5%. Loan mix of 86% was down from 90% last year, contributing the average earning asset yield decline to 3.64% from 3.68%. Funding costs were higher, to 1.38% from 1.07% a year earlier, as customers shifted to CD accounts, up to 33% of deposits from 29%, and rates on checking accounts rose to 1.10% from 0.60%. The 31 bp increase in funding costs and 4 bp decline in asset yields more than offset the leverage effect from higher asset and lower liability balances. NYCB's loan and asset quality is strong due to low loan-to-value ratios and NYCB's familiarity with the properties and owners, leading to stable and profitable underwriting practices. Nonperforming assets of $88 million are just 0.18% of total assets and net charge-offs of $6.5 million are just 0.02% annualized to average loans. NYCB reported Q1 diluted EPS of $0.20, down from $0.21 a year earlier partially due to the addition of preferred stock dividends which were not paid in the year-ago period. We expect 2018 EPS of $0.76 and 2019 EPS of $0.76. Investment Rationale/Risk Our recommendation is Sell. In late 2016, NYCB and Astoria Financial announced that they would terminate their merger plans, resulting in NYCB's share price declining sharply despite the unpopularity and negative price reaction and the time of the original deal announcement. NYCB shares have been under pressure ever since, declining more than 30% from the day before the announcement. NYCB's outlook is currently burdened by its liability-sensitive nature, where its funding sources reprice faster than its assets, causing margins to compress as interest rates rise. This was manifested in the quarterly results and we expect margin pressure to persist through the remainder of the cycle. Net interest income makes up 92% of total revenue, making NYCB extremely vulnerable to rising interest rates and therefore negative operating leverage is likely. Risks to our sell opinion include a much stronger than anticipated mortgage origination market or a reversal in the Federal Reserve's anticipated path of interest rates. Our target price is $9, 11.8X our 2019 EPS estimate of $0.76, reflecting NYCB's undesirable exposure to rising interest rates and lack of revenue diversification. SELL Stock Report | July 28, 2018 | NYSE Symbol: NYCB | NYCB is in the S&P Midcap 400 New York Community Bancorp, Inc. Recommendation Price $10.71 (as of Jul 27, 2018 4:00 PM ET) 12-Mo. Target Price $9.00 Report Currency USD Investment Style Mid-Cap Value Equity Analyst Chris Kuiper

     

    July 26, 2018 10:37 am ET… CFRA MAINTAINS SELL OPINION ON SHARES OF NEW YORK COMMUNITY BANCORP, INC. (NYCB 10.52**): We maintain our 12-month target price of $9, equal to 11X our 2019 EPS estimate and 1.2X tangible book value. We bump our 2018 EPS estimate by $0.04 to $0.80 and 2019's by $0.06 to $0. 82. NYCB posts Q2 EPS of $0.20 vs. $0.22, $0.01 below consensus. Compared to the year-ago quarter, net interest income declined 11.8% due to continuing increases in rates on interest-bearing checking and money market accounts as well as consumers continuing to shift to CDs. Net interest margin compressed to 2.33% from 2.65% in the prior year, which we expect to continue as rates rise. Asset quality remained excellent with net charge-offs of only $5 million or 1 basis point. Operating expenses decreased 15.6% on lower compensation and general & administrative expenses with NYCB on track to meet or exceed the $100 million in expense reductions it forecast for 2018. Given the lack of revenue diversification, we think NYCB will continue to suffer the


  62. Phil – Nice call on GPRO! Have a good weekend.


  63. NYCB/John – Sure I still like them.  They don't have to go higher for us to do well and they are a good, solid regional bank.  Even the downgrade says they are good for 0.80 so $12 is a p/e of $15 in a conservative case.  In our LTP, we sold 3/4 the $11 calls (Jan) and the $13 puts, which we'll roll and our net was $10.20 and we're collecting an 0.17 quarterly dividend 2 times for 0.34 so call it net $9.86, either called away at $11 with a 7-month gain of $1.14 (11.5%) or we're assigned 1,000 more at $13 and we average $11.43 and then we sell more calls and collect more dividends (there's still no options past Jan).

    Short Call 2019 18-JAN 11.00 CALL [NYCB @ $10.73 $-0.02] -15 5/23/2018 (168) $-2,100 $1.40 $-0.95 $-1.40     $0.45 $0.00 $1,425 67.9% $-675
    Short Put 2019 18-JAN 13.00 PUT [NYCB @ $10.73 $-0.02] -10 5/23/2018 (168) $-1,500 $1.50 $1.00     $2.50 $0.00 $-1,000 -66.7% $-2,500
    NYCB New York Community Bancorp Inc 2000 5/23/2018 72 $24,000 $12.00 $-1.27     $10.73 $-0.02 $-2,540 -10.6% $21,460

    Have a great weekend everyone!  

    - Phil


  64. Oops, lost track of my point on NYCB – so, mechanically on this trade, at $11 we get 1,500 called away with a gain of $1,710 and then we get assigned 1,500 more at $13 ($19,500) and the 500 that didn't get called away are at net $9.86 ($4,930) which puts us in 2,000 again at net $11.36, not far off track and then we try to sell $2.50+ of more puts and calls and that drops out net to $8.86 and we're right back where we started, but with a $1 lower basis.

    If we whittle down or net by $1 per year, in 10 years it will be a free stock – at whatever price and we'll still get the dividends and we'll still be able to sell calls and puts but imagine that, every 10 years, you followed this plan with $100,000 and you get your $100,000 back and make $10,000 between dividends and short calls.  Then, in year 10, you start the cycle with another stock but, while you wait for it to become free – you collect $100,000 in dividends and call sales from Stock 1.  Now you start a 3rd cycle but now, in years 21-30, you collect $200,000 in dividends and call sales so you buy 2 more cycles and from year's 31-40 you collect $300,000 in dividends and call sales and you get your $200,000 back from the 4th cycle.

    So now it's year 40 and your $100,000 has become $500,000 cash and your 5 FREE stocks are paying you $50,000 a year in dividends and call sales – likely holding another $100,000 in value themselves.  

    That's the easy way to turn $100,000 into $1M in 40 years.  


  65. Enjoy your travels Phil!


  66. Phil / AAPL – Hope your right I shorted them at 205 / 210 / 215 in Sept they are under water, but I believe they should pull back…….  Also have a smaller short for next week at 2015 if it gets put to me I'm ok with lightening up a bit on the stock, however would prefer to make the cash.

     I reloaded on HBI today thanks to your alert…..  

    NLY – Thanks for your feedback on this.  I have them at a target price of 11.5 so close lower than your target. 

    I have a 2K stock at 10.06,  and 20X '20 10 puts.  no short callers on the stock….  


  67. Phil / AAPl – oops My small AAPL short is at 205 expiring next wk….


  68. Airbnb Is the New NATO



  69. To all who have expressed interest in PSW Investment's partnership with marijuana company New Age Ventures: 

    • 1) You should be getting a copy of this via Greg (at philstockworld dot com) as an update but, if this is the first you are hearing about it, then he may not have you on his list so contact him asap.
    • 2) Of course, you must be an accredited investor who has filled out their paperwork to that effect (also contact Greg if you have not).
    • 3) A brief history of the conversations is as follows:

    Speaking of businesses – We're looking at a Pot Business in NJ through PSW Investments.  Rules and permits are coming soon and we already have the connections to get a rare license to sell and, because we have that, a major west-coast grower wants to partner with us on a "joint" venture.  

    Not just for NJ but we're looking to raise about $3M to expand to various states.  NJ market logic is 9M people so 1.5M likely adult users at 2 oz/yr at $200/oz is $600M (conservative figures) but, because NY and PA are not legal yet, NJ should get a lot of tourist business (in NJ, we buy all our fireworks in PA).

    We don't even have a biz plan yet but the numbers are fantastic and super-early stage and we're going to consider another Preferred offering through PSW Investments (like the one we used to launch the Hedge Fund) or possibly, we're willing to talk to Angel partners right now so let us know if you are interested either way.  

    PWSI/Tangled – At the moment, PSWI is working to raise capital for and assist with the venture and will hopefully get a percentage for doing that part (assuming success in what we're working on).  If we come up with our own capital too, it would make us better able to negotiate for a larger percentage and, of course, the more people we bring to the table, the more control we'll have of the process.  

    I'm out of here about 1pm guys – travel day for me.  Meeting in NYC with pot company for PSW Investments this weekend and then I will touch base with update for those who have shown interest.  

     

    Cannabis/Yodi – The company PSWI is working with has been a leader in CA medical cannabis products for years and that has given them great market recognition and also a huge first-mover advantage with equipment, products, distribution, etc.  Their "solutions" for smoking are great, including a gel product that goes into a pen-like device (not quite the same as vaping) where a battery warms it for low-smoke inhalation.  They also have the edible market cornered with half of the CA edibles being white-labeled by their lab. 

    What was much more interesting to me though, was a discussion I had with their pot scientist (a really cool guy who knows everything about cannabis) about hemp and it turns out they have a process to turn hemp into a sort of bio-degradeable plastic that would be far superior to paper straws and the only issue is the mix of laws for shipping hemp products.  We're going to work on that one as whole countries are banning straws and that's just a start to what can be done.

    Submitted on 2018/07/09 at 2:26 pm

    Participating/Yodi – PSW Investments is simply an LLC that operates like a venture capital group concentrating on angel-level investments in companies where our expertise can make a difference – not just our money.  By pooling our capital, we are able to diversify our risks on various projects that have long-term payouts, but hopefully at high multiples.  Also, we look for good cash-flow producers so we can maintain our dividends, which are running over 10% for our early investors.  

    For example, we own 2% of FUNN Networks, which had a $20M offer so $400,000 (potentially) from our $50K investment so far.  We own 10% of TradeExchange, which will be releasing an app this year and could become massive if it catches on (tens of millions) – that sort of thing (and we own Philstockworld too!). 

    In the case of the Pot Company, they were shopping a deal looking for $3M and, unlike everyone else who looked at the deal, I sent back their numbers restructured and showed them they could do their expansion for $1.5M and give up half as much equity, so now they love us and want to work with us going forward.  If we just help them raise cash, we'll get a little bit of the stock as a reward, but we're probably going to be able to fund the whole thing as this is a very, very exciting way to get into the space without risking it on a grower or retailer.

    We also have other companies we can hook them up with so we think we can double or triple their sales, which are already doubling naturally and the market is expanding rapidly as more states legalize but, since they are pot scientists – we don't have to worry about crossing state lines as we're selling the technology and processes between the growers and the retailers.  That's why I love this one!

    7/19 Email Update to people who expressed interest:

    I met with New Age Ventures over the weekend and they are the medical
    marijuana specialists behind half the consumable pot products (edibles,
    vapes, oils, gels..) in California, Nevada and Michigan.  What they do
    is white-label their stuff using the pot from their partners and
    generally get 25% of the profits (after their costs are paid, of
    course), which is better than being a grower, distributor or retailer. 
    They also market their own Jade House products (
    https://jadehousegenetics.com/ ) and have a patent on a THC/CDC delivery
    system that works like those breath strips that melt on your tongue. 
    Unlike edibles, it doesn't go in your digestive system and it's absorbed
    quickly so it's great for chemo patients as well as people who want to
    time their high for concerts or movies as the effect is almost instant
    vs 30-60 mins for edibles and, of course, the dosing is very exact -
    also a huge plus compared to edibles.

    Edibles are much more popular now and the fastest growing segment (you
    can't smoke in a lot of places) and these guys own that space.

    They came to us looking for $3M but Lloyd and I took a look at their
    plan and, unlike everyone else who said they could raise money for them,
    we showed them that they could accomplish the same thing with $1.5M and,
    after speaking to them this weekend, we've further modified their needs
    to allow them to double their business ($2M in sales with $385M in
    profit last year) within 60 days of funding and then self-fund the
    rest.  Needless to say they are thrilled and going with us on the deal
    but now it's up to us to turn around and get $1M together to fund the
    venture.

    Time is of the essence because CA recently changed the regs (as of July
    1st) and 70% of all competing products had to be pulled off the shelves
    as they were non-compliant.  New Age spent $350,000 last year making
    themselves compliant in anticipation of the new laws (so they would have
    made $700,000) and they could literally quadruple their sales tomorrow
    if they had product to deliver.

    As it is, our plan is to get them the space and equipment (already
    arranged) that they need to double up production but the bonus is the
    faster we do that, the better our chances are of gaining market share
    (especially getting into places we weren't able to before with product).

    Aside from that, these guys are top-notch pot scientists and we were
    talking about hemp and it turns out they can make a plastic out of it
    and that plastic would be able to be made into straws and lids for cups
    that is completely biodegradable!  Probably another $1Bn opportunity there!

    Anyway, that's the short story.

    We can put the investments through PSW Investments, which is paying
    0.20/share dividends currently (up 3x in 2 years) at $4/share (was
    $1/share when dividends were a nickle!) with a preferred coupon on our
    shares of New Age Revenues that pays you back before converting to
    ordinary – that's our best bet to make this all happen quickly so call
    me to discuss details and you MUST have filled out your qualifying
    paperwork with Greg (greg@philstockworld.com) before we can send you
    anything and, of course, this will be first come, first served to be
    fair (and quick).

    I do NOT get excited about these deals and I don't like fad investing -
    for a lot of reasons, I am excited about this and I don't think it's a
    fad at all – it's a $20Bn black market that's turning legal!  Things are
    a little crazy because it's like a gold rush but, like any smart 49'er,
    we're not out there panning all day – we're going to be the ones selling
    the pans and the picks and the mules to the many, many people who hope
    to strike gold. We don't have to be lucky to win that game…

    Also, we are already speaking to one of the largest public pot companies
    in Canada (NDA on that), investors in China and 3 different operators in
    NY, NJ, PA and MA who we can also do deals with but this one will be the
    lychpin that drives it.

    Needless to say, call me asap to discuss.

    • 4) Over the course of 2 months, as I had hoped, our participation in the deal went from arranging financing for a small percentage to participating in the financing for a large percentage.  New Age originally wanted $3M (and were a manufacturer, not a grower, which turned out to be better) and we reorganized their plan (not opening another plant but expanding what they have) and the number we're now at is $1.5M of which we have $1M committed.   
    • 5) Unfortunately, New Age has not been standing still and a fortunate turn of events left them as one of only 2 manufacturers that are permitted top work in California at the moment, due to a change in requirements as of July 1st which New Age anticipated (spending $350,000 last year to be in compliance with the law before it was passed) and now there is far more demand than they can fill for the next 3-6 months.  
    • 6) That makes them wary of giving up too much equity but the deal we're arranging for PSW Preferred investors is that we'll take a 27.5% stake for $1.5M but, providing new age returns $1.5M to the Preferred Investors within 5 years ($300,000 per year or 20%) then we drop back 40% to 16.5% ownership.  This is called a clawback and is kind of a "put up or shut up" provision but New Age's business has doubled in two months and should double again on with our capital – so it's not unreasonable (and they'd go with someone else if we didn't).  
    • 7) In addition to ordinary distributions of 0.20/share (5%) from PSW (which we hope will be double next year as our cash-flow projects kick in), PSWI Preferred Shareholders on this venture will get the first 50% of New Age Distributions to PSW until the clawback provisions are met, at which point they will perpetually get the first 30% of distributions from New Age. 
    • 8) Just last night, Ken was meeting with Kind in China (not the energy bar) to set up a US distribution deal for MJ Vape Pens and such where we (New Age) supply the consumables.  That deal alone could drop a few million to the bottom line and we (Lloyd and I) are working to do more deals like that as things move forward.
    • 9) Neil (my brother and a PSWI Investor) was just over at New Age yesterday, checking the place out and they discussed franchising the manufacturing into other states (we're talking about partnerships with 3 NJ groups at the moment) to which end he's going to help them streamline their processes as we build out the new production lines.  
    • 10) There is A LOT of hemp waste in these processes and even more hemp waste at the farms, where we now have tons of connections.  Here's what we can make with hemp:

    Image result for things you can make with hemp

    9 Uses For Hemp You Wonâ??t Learn From Mainstream Media - industrial hemp chart

    Image result for things you can make with hemp

    Related image

    So I'm very excited about this but time is of the essence as the state will begin approving more manufacturers in October so, for a couple of months, we have a massive advantage that will let us gain market share.  Also, NJ is also timed to announce licenses in November – so it's going to be a busy year.

    I thank everyone for committing in a timely fashion and now the lawyers are the delay (as usual) putting together the paperwork on our side (a new round of preferred shares) and on new ages side (the share purchase agreement for New Age) but I HOPE (not a valid investing strategy) to have it done by the 17th and get the Funding in by the end of the month at the latest.

    So that's where we stand – I will keep you posted.  


  70.   Stealthy misdirection…. :(

    https://www.youtube.com/watch?v=rMHPH96Z3ic



  71. Venezuela’s Nicolás Maduro survives apparent assassination attempt







  72. Chinese tariffs on US LNG could give leg-up to Australia


  73. ‘Medicare for All’ Bill Estimated At $32.6 Trillion, Says Study



  74. Why Americans Spend So Much on Health Care—In 12 Charts – WSJ


  75. Good morning!

    I'm at Disney this week but no park today as it's $120/day and I have 5 kids with me!  We got 3-day passes so Tues/Thurs/Friday are park days and today they're going to the water park, which I have no interest in because we're staying at the Beach Club – which already has a great pool.

    Image result for disney beach club pool

    So you know what I'll be doing for lunch this week!   Otherwise, I'll probably head out to meet the kids early on park days and we haven't figured out Wednesday yet. 

    Anyway, not much going on but, other than an assassination attempt on Venezuela's Maduro, it's been pretty quiet as Trump's on vacation along with Congress.  

    In Angry Tweetstorm Trump Escalates Attack On Media: "They Can Also Cause War", Claims US Winning Trade War With China.

    Musk posted a Hitler Video, that's pretty funny.  

    White House is not ruling out slapping auto tariffs on Canada, an official says.  

    UK trade minister says ‘no deal’ Brexit more likely than not

    China Is Now Left With Just Three Options, And They Are All Equally Bad. 

    Looks like we're still drifting up this morning.  It's vacation-time in Europe so volumes should be really low and Shanghai is still heading lower (1.29%) but Hong Kong was up 0.5% and Nikkei was flat.

    Oil is back at $69.50 for no reason, so fun to short there but the holiday is coming – so a wild ride ahead.  Tight stops and out of /BZ goes over $74.

    Metals will be good once the Dollar stops going up:


  76. Greg,

     

    Can you please send me the information on the New Age Venture investment if it is not too late.

     

    Thank you,

     

    Ken Felton