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Thursday Thoughts – Window-Dressing Flatlines Markets into the Holidays

We've gotta hold those highs, right?

There's nothing Fund Managers and Brokers hate more than to have their clients talking about pulling money out of the market around the barbeque.  With a holiday weekend approaching, we can expect all the stops to be pulled out to maintain our record highs but what happens when the big boy traders come back from their summer vacations is anyone's guess.  

At the moment, as you can see from the SPX chart with volume, there is a huge surge, like clockwork, at the end of each trading day, that pushes the index higher into the close and even higher overnight (when there is no volume at all) and that has accounted for about 1/2 of the S&P 500s gains for the week.  The rest of the gains came from a new trade deal with Mexico that's worse than our old trade deal (NAFTA) and now Trump says he will have a deal with Canada tomorrow, probably also worse – so of course the markets should be higher…

It's all nonsense, of course but Alice in Wonderland was all nonsense for 90 minutes and then she woke up.  It's hard to say when investors will wake up but they usually do at some point but, as I noted yesterday, things can get a lot sillier before they get saner.  

Oil (/CL) is hitting our silly target of $70 this morning and we discussed shorting at this line in yesterday's Live Trading Webinar and I reminded our Members in Chat this morning that we are shorting below the line only, with tight stops above but I'm willing to lose a few Dollars while wating for the nice, post-holiday pullback we're expecting.  

Oil and Gasoline (we're short that too) are things that are bought by the masses, not just rich folks and, although our GDP is expanding at 4.2% in Q2 and people like us (who have enough savings to be able to play with stocks) are feeling pretty good, economically, a new study by the Urban Institute reminds us that 4 out of 10 Americans are struggling to pay for their basic needs such as groceries or housing.  It's a problem even "Middle-Class" households confronting.

Middle-class households tend to struggle with paying their health care bills rather than utilities, for instance. Health care costs have outpaced wages and inflation, pushing more Americans into high-deductible plans, which can backfire when serious health problems arise.  "A lot of people are looking at the fact that wages aren't keeping up with household costs as one reason families are having difficulty making ends meet," UI's Karpman said. "Even for families with health insurance, they may be facing high deductibles that leave them facing high costs."


Almost 60 percent of Americans with multiple chronic medical conditions experienced material hardship in 2017, compared with about 33 percent of adults without any chronic illnesses, they found.  Educational attainment was also tied to hardship. The researchers found that 56 percent of Americans with less than a high school degree struggled to meet their basic needs. By comparison, just 24 percent of college grads experienced hardship.  "I hope that people will see," said Karpman, "that even though we're in a relatively healthy economy, a lot of families are still having difficulty meeting their basic needs for food, housing and health care."

In fact, this morning we got the BEA's report on Personal Income and Outlays and, once again, people are spending (+0.6%) faster than their incomes are rising (+0.4%) while Inflation holds steady around 2%.  That means about half of the growth in GDP is being driven by consumers who are going further and further into debt as they too buy into all the BS about how GREAT the economy is getting.   It is getting better – just not so much better that they should be borrowing against the future…

That's why we steer away from investments that require money from the bottom 50% – they don't have any!  Traders don't seem to realize that gasoline is one of those businesses because Jay Leno and Jerry Sienfeld can both have aircraft hangers full of cars but you can only drive one at a time (until we have self-driving cars), no matter how rich you are. 

Image result for cafe standards chartWe have 270M cars registered in the US and we sell 17.5M new ones so that means our fleet turns over roughly after 15 years.  HOWEVER, auto sales were slow after the crash so it took a while before people bought enough new cars to make a dent but consider that the cars people bought up until 2011 (half a fleet ago) got 27 miles per gallon and new cars are now averaging 40 mpg – that's 37% less feul used by a new car compared to an old one!  

While President Trump is doing his best to reverse the Obama rules on fuel-efficiency, the rest of the World is still demanding better mileage (and the US is way behind as the rest of the World averages 50 mpg already) so auto makers have not been quick to re-introduce low-mileage cars, though they are very happy to sell high-margin Trucks and SUVs to whoever feels they need those to pick up the groceries but even those "gas-guzzlers" are now averaging 30 mpg when you buy a new one. 

So, unless we make more drivers (and Trump is busy kicking them OUT of the country) or get our rapidly aging population to drive a lot more (look out!), then our total use of gasoline is going to grind downwards, year after year, as more and more new cars replace the old ones.  That's not even taking into account the possible success of electric cars, which would devastate gasoline demand, of course. 

 That's what makes Gasoline (/RB) shorts a good play into the holidays as traders are generally lazy and generally chart and pattern driven and don't take into account changing fundamentals that blow their trading premise.  It's been a successful strategy for us all year and hopefully it holds up this holiday and then we can look forward to another nice payday around Thanksgiving.


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  1. How is the tax cut working for you? Not bad for corporations:

    But manufacturing not being helped as much! My guess is that it won't be making much of a comeback:

  2. Working hard to hurt their constituents:

    Charles Gaba has been diligently tracking requests for 2019 Obamacare premium hikes, and he’s got good news and bad news. The good news is that insurance companies are requesting lower rates this year. If things were normal, rates would be going down about 5 percent next year.

    The bad news is that things aren’t normal. Republicans have been busily sabotaging Obamacare as best they can, partly by refusing to pay Cost Sharing Reduction payments and partly by eliminating the tax fine for not being covered. Insurance companies have to account for these uncertainties, and as a result the average premium request is about 4 percent higher than last year.

    So the system is actually working quite well absent the sabotage! 

  3. Good morning, All!

    The webinar replay is now available!

  4. Good Morning!

  5. Rb/Phil- holding rb shorts into the holidays right? I only holding 1 contract short, thinking to add another as we speak.

  6. Re MJ stocks- someone was asking about anything to get into and RVVQF is moving up along with CRON and OGRMF. Holding off on the last to see if it will come down, but it hasn't at this point. RVVQF is the native component in Canada so there will not be the taxes when sold on the reservations which will save a lot. My sister used to buy her cigs @ our close native store because of less cost. I think same idea with RVVQF. Anyone can buy at their stores not just natives. Am slowly buying more of these stocks which have been moving up. They are relatively inexpensive now, but catching on.

  7. Only CRon has options.

  8. Citron out negative on CRON. 

    $3.50 target.

  9. albo-I think any of these company's might be buyout candidates. I am very suspicious of analysts. Seems they always have a not so hidden agenda.

  10. I've followed Phil for years through his daily blog but only recently became a member. I'm familiar with a lot of the trade set ups but not exactly sure why certain strikes are selected. I noticed that the relationship of the strikes to the price history and current price is not always consistent. Take the Butterfly portfolio, some of the BCS's have the long call position at prices that the stock hadn't seen in 2 years, but the AAPL strike is not so far in the money. Are there rules of thumb for deciding on the strikes?  

  11. Pirate – Citron has had mixed results on their calls, as you probably know.  Certainly a grain of salt is warranted.

  12. AMZN- Up big again.  Bezos' net worth approaching that of Buffett and Gates combined. 

    Unreal !

  13. CRON    gees, look at all those Sept puts (including the weeklys) 

  14. albo--haven't you been bullish on AMZN for a long time?

    Great call!

  15. CRon look at Oct calls-hmm. People selling puts buying calls? And all the volume is today? Weird dang market. Nothing makes sense.

  16. Good morning!  

    Dow not looking so hot but we'll see if 26,000 holds.  Nasdaq off to the moon, not much danger of losing 7,600 and Dow just being lightly rejected at the 25% line (26,250) and if we count the run from 25,200 (20% line) then that's 1,050 so 200-point pullbacks to 26,050 (weak retrace) and 25,850 (strong) is what we'll look for.

    Absent the sabotage/StJ – Sadly, I think the sabotage is a permanent feature.  Like terrorists, you can try to stamp out the GOP but they keep recruiting new ones with their propaganda films and empty promises of rewards in the afterlife…

    Speaking of the Nasdaq, just made a bit turn to green.

    Speaking of CRON – be careful, Citron has their eye on them:

    Citron bearish on Cronos Group, sees 70% downside risk; shares down 12%

    • Cronos Group (CRON -11.9%) is down on double normal volume on the heels of a bearish report from Citron Research with a $3.50 (70% downside risk) price target.
    • Red flag: failure to disclose the size of its distribution agreements with Canadian provinces (unlike other cannabis producers).
    • Citron also cites the market's animal spirits for all-things cannabis. There are too many producers so there will be more losers than winners.


    Investors move into General Cannabis, up 15%

    • Thinly traded micro cap General Cannabis (OTCQX:CANN +14.9%) in up on modestly higher volume in early trade, leaving behind an intermediate selloff that shaved over 20% off the stock's valuation.
    • In its most recent quarter ending June 30, the company surpassed $1M in sales for the first time.


    /RB/Dave – I have 2 short at $2 at the moment, will hold those over the weekend and will add at $2.02 but looking to get back to 2 at $2.01 avg if I do.  

    Pot stocks/Pirate – A lot of them are way overblown but, like dot coms, it's early in the cycle and some will be huge winners and some will blow up.

    Strikes/Bill – Generally the long positions (like the bull call spreads) are based on my target for the time-frame but, in the case of the OOP, the longs are just protection in case the stock rallies and burns us on the short calls – not an actual target.  The Butterfly Portfolio is all about selling short-term premiums, the long positions are generally just for decorations but, in AAPL's case, it's our favorite stock and we have a proper spread backing up our sales.  

    Speaking of resurrections:

    Build-A-Bear Workshop up 9.3% post Q2 results

    • Build-A-Bear Workshop (BBW +9.3%reports Q2 revenue growth of 5.1% Y/Y to $83.2M.
    • Net retail sales increased 6.1% to $81M.
    • Commercial revenue down 50% to $1.06M.
    • Retail gross margin rate declined 210 bps to 42.5%.
    • SG&A expense rate up 40 bps to 45.6%.
    • Number of franchised stores 96 compared to 89 Y/Y.
    • Total company-owned retail stores were 365 compared to 353 Y/Y.
    • FY2018 Guidance: Revenue: $345M to $355M; Diluted EPS: $0.40 to $0.57; Capex: $15-18M; D&A: $16-17M; Cash and cash equivalents: $25-30M.
    • Previously: Build-A-Bear Workshop GAAP EPS of -$0.12 (Aug. 30)

    AMZN/Albo – Sure, why not $2,000?  After all BRK.A is $316,540 so AMZN has a long way to go, right?  That's the new trader math these days…  

    5% rule said run from $1,000 to $1,500 should get a $100 pullback to $1,400 (weak) and $1,300 (strong) and it did (though very briefly at $1,300) so now we have another $500 run to $2,000 and we should AT LEAST get those $100 pullbacks but really, up from $1,000 in a year means we should get a $200 pullback (strong on recent, weak on long-term) at least back to $1,800, but AMZN is way too scary to short.  

    I do kind of like the AMZN Nov $2,100 ($142)/2,050 ($113) bear put spread at $29 on the $50 spread and 3 of those ($8,700) with 2 short Nov $2,200 calls at $43 ($8,600) would be net $100 on the $15,000 spread and AMZN would have to gain $200Bn in 78 days to hit $2,200, that's like adding almost any non-FAANG company on the S&P in value!  Gosh, that's just too good not to do in the STP!   Very dangerous though, we can afford it because we're up over $100,000 for the year but very easy to lose $10,000 on!  

  17. LOL, margin on the 2 short calls is $30,000!  

  18. Ah Haa- Shortseller Andrew Left announced a 3.50 target on Cron via Twitter?? Then Citron follows his lead? Now we know who bought all those puts. I certainly hope they get burned. Reminds me of Ackman.

  19. I got out of CRON, +50% good enough for now. AAPL market cap at 1.083T. Only worth $83B more since all the news about it crossing $1T less than a month ago? LOL, what inflation??? It's almost like money isn't money anymore. Like there's a new system of transacting that's more efficient in an economy based on transactional knowledge instead of manufacturing and real estate. I wish someone had a theory about that.

  20. Bio – check out The Zero Marginal Cost Society by Rifkin 

  21. BDC I bought your LVVV and it is still in the edibles and oils? Hasn't moved in the latest run up. Figured you might have some news knowing  of course that this is Calif not Canada. I have a 100% gain on Cron but hedged so am debating. So far it is holding steady. I think they have heard some rumblings and are trying to get everyone to bail not too mention the "short call."

  22. Take that back-made over 200%. Oh well better bail I guess!

  23. Jabob -  I have been bullish on AMZN.  My thinking is that they can become much more profitable any time they wish.  Still the PE seems ridiculous.  Have been afraid to go long, but have been selling deep out of the money puts for some time.  Wish I'd been long, but I agree with Phil that it's too scary. 

  24. Phil:  What are you thoughts these days on DBA?   I have Jan 2019 18 short puts (sold for .66) and 2019 19 short puts (sold for .75), as well as 2020 short 21 puts.  These were all sold as an offset to hedges that long-ago expired worthless.  The extrinsic value on the Jan 2019 19s is nearly gone, and part of my position was put to me today.  I have been trying to even roll the 2019 18 and 19 puts to the 2020 17 and 18 puts to no avail since DBA has relentlessly gone down.  I now can roll the 2019 19s for a .17 credit to the 2020 19s, or I can take my losses and move on.  I also need to decide if I should keep the shares that were put to me at 19, or take the loss and move on.  Do you think that we will see an uptick in DBA, or, in any case, do you think it that is just too hard to fight the decay?  Any thoughts that you have on this would be appreciated.  Thanks.

  25. I have a theory about facebook. Like all of my theories it's all conjecture and no substance, but as long as were predicting future prices it's all BS anyhow :)

    The next earning report will be a disaster. 

    * The last earnings report was a disaster and they lost 20% of their value in one day. This could be a blip, but more likely it's a trend that lasts a least a few earnings cycles.

    * The main driver will be customer verification that resulted from the Russian fake news scam and subsequent response. I have personal experience with this placing an FB ad. They wanted a scanned ID, home address verification where they then mailed a code to your house, in order to place an ad that their bots decided was "political or of national importance." Apparently a lot of people got caught up in this and it's been a Hindenberg moment for them. In the long run it's probably a good thing to have Real Person verification, but on the short term a lot of revenue can be lost because the ease of placing a $60 ad with two mouse clicks was muted for a whole bunch of folks.

    * Now that FB has 2B users how much can it really grow? There's a natural upper limit on it's growth due to this, though they can obviously grow the $/person that they are generating by a significant amount.

    * Least importantly, but still worth mentioning, there's been an F Facebook movement; folks "cord-cutting" either to ease the online addiction, get back out into nature, spend more time with real humans, and various groups with petty grievances, e.g., conservatives who feel slighted/victimized for whatever reason (thoughit seems they always feel this way so maybe that's irrelevant).

    The last piece of the puzzle is the overall market. It's obviously helpful if the next market leg down is captured simultaneously. Then this becomes an exercise in catching which stock falls the most instead of which stock falls while amazon zooms to 3000. 

    With that said, Nov options are the play but already fairly expensive with 160 puts at ~$3. Another 20% down from here is ~142, so the 145's (1.05) and 150's (1.50) are worth looking at. Long term I think FB can be cut in half (from $500B MC to ~250B) before a long 10X run up getting them over $2T.

  26. FB: also, to Phil's point, the market cap can be a self-fulfilling prophecy because ETFs have to buy it as the market cap rises, so then the price goes up, etc. When that goes the other way it's like GE. So much selling you don't know where it's coming from.

  27. Theory/BDC – It's called the Greater Fool Theory!  cheeky

    DBA/John – It's really just an inflation hedge but there's no inflation and global warming has given us longer growing seasons, depressing the markets (until it gives us droughts).   Also, it decays a lot as they roll over numerous contracts so, the longer you hold them, the lower they go so, without a short-term catalyst in site – it's not the best thing to stick with. 

    With DBA at $16.84, as an inflation hedge, I do like the 2020 $15 ($2.85)/17 ($1.60) bull call spread at $1.15 and those can be offset with 1/2 x the short $17 puts ($1.05) to net in for 0.625 on the $2 spread so the upside potential is 220% so that's what I'd move to if I were going to stick with it but perhaps instead sell puts in something that benefits from low inflation – like a REIT that you REALLY want to buy.

    Getting stuck with DBA is not so terrible as you can sell those 2020 $16 calls to cover for $2.15 so, if you are assigned at $17, you lower your basis to $14.85 and, if you do that every 18 months for 10 years, you'll zero out your cost basis and THEN DBA makes a fantastic inflation hedge!

    FB/BDC – Good point on ad difficulties as well as growth and I think they have already saturated how many hours people can spend on FB.  Jackie is anti-phone these days, she gets really pissed at her friends for not "living in the moment" but I think she gets that from me, as I tend to go around without a phone and have a very nice time, nonetheless.  She's not the only one, there are little pockets of "get off your phones" evangalists popping up – might be a trend.  

    Oil stubborn at $69.85, /RB $2.005.

    /NG had an insane move on inventories, which were pretty much in-line:

    I wish I saw that chance to buy, was watching Buffett on CNBC and Bloomie telling people to keep buying stocks (because he has a lot of them!).  

  28. Speaking of Nasdaq boosters, AAPL $225!  

    Remember, every 1% is $10Bn – that's M's entire market cap, it's the GDP of the Bahamas or Monaco…  

  29. I just explained to my son-in-law who is from Argentina the concept of shorting a couple of weeks back and he just sent me a text saying that we should short Argentina as things will hit the skids there it seems. He said that it could be as bad as what they had in 2001! There is an Argentina ETF (AGT) but no options unfortunately! No matter what, a bad situation globally. But markets won't care…

  30. As long as my phone number is for only family and friends, I'm more than happy to answer it… :)

  31. AAPL

    ~~ Apple to unveil new iPhones, iPad, and other products on September 12 at 13:00 ET, according to CNBC.  

    STJ – The Argentine peso is down sharply..  Hitting new lows today.

  32. bdonnelly713, interesting in just the first 20 pages a number of concepts I nod along to, and some others "is that how it works?" Always learning…

  33. It's a lot of hype and fad and not always substantiated arguments, but certainly worth thinking about : ) 

  34. Argentina/StJ – Long, slow disaster over there.  

    TGIF – Markets Close Q2 In the Red for the Year

    Argentina is leading Emerging Markets down to Hell as their Peso is rapidly collapsing and this chart is against the Mexican Peso, which is also falling compared to the Dollar.  We will all cry if Argentina falls apart but it's just another major thing the markets are ignoring at the moment as there are simply so many things to worry about that this doesn't even rate a mention in the media.

  35. Phil,

    What do you think about /SI down here?

  36. pirate, hmmm, I never heard of LVVV so I think that was someone else. In general I like the MJ stocks because the Feds are watching the States rolling in cash without getting a taste, and this only goes on for so long IMO. I think the market is expecting a decriminalization and taxation schema coming from the Feds at some point in the predictable future. Temporarily though, I think they are overheated.

  37. Argentina

     MELI     one could play for further downside using options

  38. Stockbern – Good idea.

  39. BDC – Based on your FB analysis, how does this look? Is it a viable option (pun intended)? Still new to this site, so playing out scenarios; 

    Buy 1, Nov 16 2018 $180 Put for ~$9.90

    Buy 1, Nov 16 2018 $160 Put for ~$2.90 for a total of $12.80 cost for 2 put options

    Sell 2, Sep 21 2018 $170 Put for ~$1.10 for total $2.20; Then repeat this for October options to collect another $2-$3 ; That will have us net in $20 spread for about $4-$5 net cost per option.

    Thanks in advance.

  40. Oops – sorry not the spread – basically 2 long puts;

  41. /SI/Japar – This is definitely where I like /SI long but if it fails $14.50, it won't pay to be brave and it did fail it (briefly) just a week ago.  In fact, so far it looks like a weak bounce so that's not a smart thing to play if you can't stand big losses and I'd wait until we see a bottom forming – not good to guess.

    Phone/1020 – Well back in the day we used to have house phones and answering machines and, when we were out, we'd find out who called and call them back later and that was just fine!  

    Image result for cell phones back in the day

    Russell's turn for a big pop today:

  42. Speaking of /SI, WPM is in the toilet thanks to /SI prices.  The last 3 Qs they beat earnings by 18.8%. 6.7% and 14.3% and they should have no trouble hitting 0.60 for the year on a $17.49 stock (p/e 29) in an off year.  

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 849.6 706.5 620.2 648.7 891.6 843.2 857.2 823.4 920.5 -0.1%
    Operating Profit $m 600 387.7 202.9 -157.3 223 74.7 328.9     -34.1%
    Net Profit $m 586 375.5 199.8 -162 195.1 57.7 315.1 271 318.7 -37.1%
    EPS Reported $ 1.65 1.05 0.56 -0.41 0.45 0.13 0.71     -39.8%
    EPS Normalised $ 1.65 1.05 0.68 0.22 0.56 0.46 0.69 0.58 0.69 -22.3%
    EPS Growth % +6.5 -36.0 -35.6 -67.2 +151.4 -17.0 +13.2 +25.6 +18.2  
    PE Ratio x           38.1 25.8 30.3 25.7  
    PEG x           1.49 1.01 1.67 6.63

    They won't recover unless /SI does but it's a slightly safer way to play silver than just risking the Futures.  In the OOP, we have the 2020 $15 calls half-covered with the $25 calls and we sold the $20 puts for $3.30 so net $16.70 and we're getting close, but this is below where we came in in Feb – so another chance to play. 

    As a new play on WPM, I like:

    • Sell 10 WPM 2020 $20 puts for $3.70 ($3,700)
    • Buy 20 WPM 2020 $15 calls for $3.85 ($7,700) 
    • Sell 20 WPM 2020 $20 calls for $1.55 ($3,100) 

    That's net $900 on the $10,000 spread that's $5,000 in the money at $17.50 and your worst case is owning WPM at net $20.90 but the upside is a nice 10-bagger at $9,100 and it's not like we're asking for much.

    In the OOP:

    • Let's buy back the 10 short 2020 $25 calls for 0.62 ($620)
    • Let's add 10 more 2020 $15 calls at $3.85 

    In the LTP:

    • Let's buy back the 10 short 2020 $25 calls for 0.62 ($620)
    • Let's roll down the 20 2020 $17.50 calls  at $2.40 to 40 of the 2020 $15 calls at $3.85 

  43. Everyone turning down now as Trump restates $200Bn tariff threat with China.  

    He's just doing anything he can to change the headlines. 


    Eurozone economic sentiment dips for eighth straight month in August

    • Eurozone economic sentiment eased to 111.6 in August, from 112.1 in July pulled down by less optimism in industry and services.
    • Business climate indicator fell to 1.22 in August from 1.30 in July, following a similar downward path from a peak of 1.63 in January.
    • The easing of sentiment in August came with a decline of the indicator for industry, to 5.5 from 5.8, although production expectations rebounded after a July decline.
    • Sentiment in services, which generate more than two thirds of euro zone gross domestic product, dipped to 14.7 from 15.3 in July, with worsening demand expectations.
    • Consumer inflation expectations over the next 12 months rose to 18.2, close to the long-term average of 18.6. Selling price expectations in industry increased to 10.3 from 9.6 in July.

    Republican Senator wants FTC to investigate Google

    • U.S. Senator Orrin Hatch wants the FTC to examine potential antitrust developments in Google’s (GOOGGOOGL) search and digital ads.
    • Hatch, the Republican chair of the Finance Committee, sent a letter to FTC Chairman Joseph Simons citing a number of antitrust complaints since the last FTC investigation five years ago.   
    • Last month, Simons said he’d take a look at the EU’s $5B Android fine for antitrust violations, which had followed another multi-billion fine for shopping search result violations.    
    • Previously: Alphabet will take $5.07B charge in Q2 for EU fine (July 18)
    • Previously: FTC head will take close look at Google's EU fine (July 18)

    Canadian GDP flat in June, missing expectations

    • Canadian economy was flat M/M in June, following 0.5% growth in May, compared to the consensus of 0.1%.
    • Canadian GDP grew by 2.9% in the 2Q18, following an upwardly revised expansion of 1.4% in the first quarter, beating the estimate of 2.4%.
    • The BoC hiked rates by a quarter point in July, to 1.50%, marking the fourth such increase since the summer of 2017, however, the GDP data dampened the expectation of another rate hike in the next week.
    • The central bank said at the time that it anticipates growth to average around 2% over the three years ending in 2020, as business investment and exports grow.
    • The bank also said it was monitoring a trade dispute with the U.S., but added that it expected the impact of tariffs on Canadian steel and aluminum to be modest.

    U.S. mortgage rates ticks up from last week: Freddie Mac

    • With the 30-year fixed-rate mortgage rate up only one basis point since last week, rates have been relatively flat this summer, a breather that may allow some buyers to get into the market, says Freddie Mac.
    • 30-year FRM averages 4.52% for the week ending Aug. 30, 2018, up 1 basis point from 4.51% from the previous week. A year ago, the 30-year FRM averaged 3.82%.
    • “While sales and price growth have softened these last few months, this leveling of rates may be helping more buyers reach the market," says Freddie Mac Chief Economist Sam Khater.
    • 15-FRM averages 3.97% vs. 3.98% in the previous week.
    • 5-year Treasury-indexed hybrid adjustable-rate mortgage averages 3.85% vs. 3.82% in prior week.

    Ford bonds lose value after Moody's cut

    • Ford (NYSE:F) bonds are down almost 4% following yesterday's ratings cut by Moody's.
    • "Ford has more than $80 billion of debt and would become one of the biggest issuers in the U.S. high-yield bond market if it gets downgraded further," writes Bloomberg's Lisa Abramowicz.
    • Shares of Ford are down 1.81% on the day to $9.78 to follow on the drop yesterday. The 52-week low on Ford is $9.35.
    • Details on the Moody's ratings revision.

    Reuters: Venezuela's port woes stall oil exports to Rosneft, U.S. companies

    • The closing of a dock at Venezuela’s main oil export port could delay as much as 5M barrels in crude deliveries to Russia's Rosneft (OTCPK:RNFTF), further complicating oil-for-loan agreements between Venezuela's state-run PDVSA and the Russian company, Reuters reports.
    • A tanker collision over the weekend forced PDVSA to halt operations at Jose port’s South dock, curtailing planned shipments mainly for Rosneft but also for U.S. firms Valero Energy (NYSE:VLO) and Chevron (NYSE:CVX) until damages can be repaired.
    • Rosneft and PDVSA signed a refinancing agreement in April designed to allow the Venezuelan company to catch up on delayed loan payments by delivering more crude to Rosneft, according to the report, which also said the Russian company was using Jose’s South dock to pick up the cargoes.
    • PDVSA reportedly was scheduled to deliver 4M bbl/month (133K bbl/day) of heavy crude to Rosneft under the April agreement, and PDVSA had planned to deliver 4.5M barrels to VLO, CVX and other U.S.-based companies during August under supply contracts and spot deals.

  44. Air Leak Temporarily Patched at International Space Station

  45. The Myth of Secular Stagnation

  46. This Is Your Brain on Nafta

  47. Buffett says Berkshire buying own stock, more Apple

  48. German Taste for Stocks May Sour on First Losses Since 2011

  49. How Cities Are Saving China

  50. Inside Venezuela’s black market fuel trade

  51. Still not back to where I stopped out! 

  52. I recently read that Mueller probably needs to come out with something before Labor Day or most likely   he'll wait until after the midterms.  Interesting to see if anything happens in the next few days.

  53. Mueller/Albo – I would think he's ignore any kind of political timeframes and just do what he does when he does it – that's the only real way to be neutral though, of course, whatever he does, whenever he does it, will seem politically motivated (like Comey).

  54. Tariffs/Phil- worth poking ES at 2900? not sure where is a good short line for NQ…

  55. Phil – if you think the S&P 500 will be up 45 points over current price in one month, how to play it?

  56. Wow, just freakin' wow:

    President Trump on Thursday announced that he will not give civilian federal employees a pay raise, saying in a letter: “We must maintain efforts to put our nation on a fiscally sustainable course.”

    Giving $2T to the top 1% is OK, but freezing the salaries of federal employees to help cut the deficits is the solution! These people have no shame whatsoever! 

  57. Mueller- Ive read that the unwritten rule in the DOJ / FBI is 60 days before elections.  So Im thinking he'll make more things public by the end of next week.  

  58. /ES/Dave – Big wild card with China worse and Canada better – I'm staying out of it.  

    Up/Tangled – Well there's /ES, of course but also SSO, a 2x long S&P Index at $126.25 at the moment so 45 /ES points would be 1.5% so 3% on SSO gives you a target of $130 and the Sept $125 ($3.20)/129 ($1.05) bull call spread is $2.15 for the $4 spread that's $1.25 in the money and almost a double if you're right.  

    Raises/StJ – Such a mean, petty thing to do.  2.1M people make $276Bn and a simple 3% raise to keep up with inflation would be $8.25Bn – not even a molecule in the bucket of Federal Spending!

    It's the same old GOP BS, cause budget problems by giving money to your friends and then propose fixing budget problems by taking money from your enemies.    

    Mueller/EMike – Unless he has an iron-clad case, he's more likely to wait to make sure it's 100% set.

  59. Interesting:

  60. No automatic alt text available.

    Well, there goes a 4-day winning streak but not too much damage.  

  61. This looks quite promising but no way to cash on that now:

    In mild pain tests with rhesus monkeys, AT-121 was found to be 100 times as potent as morphine. And when the researchers let monkeys self-dose themselves with various opioids, including AT-121, they didn’t take the experimental drug any more than a placebo saline solution, suggesting that it wasn’t creating a high. Another test found that, even in high doses, AT-121 couldn’t cause classic overdose symptoms.

    “In addition, this compound also was effective at blocking abuse potential of prescription opioids, much like buprenorphine does for heroin, so we hope it could be used to treat pain and opioid abuse,” said senior author Mei-Chuan Ko, a professor of physiology and pharmacology at Wake Forest’s School of Medicine, in a statement.

  62. Fix / Phil – And the fix is even more despicable when your friends are the top 1% and your enemies are the middle class! 

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  64. Good morning!

    Nothing too exciting, Futures down a bit but not much and they'll do whatever it takes to hold 2,900 and 26,000 into the weekend but I'd make sure those hedges are active into next week – especially if the Canada deal doesn't happen on top of China getting worse.  

    U.S., Canada Race to Seal Trade Deal

    Trade talks between the U.S. and Canada moved into what Ottawa’s chief negotiator called “an intense rhythm,” as both sides rushed to try to strike a deal by the Friday deadline set by the Trump administration.


    Nafta Rewrite Holds Promise for Unions

  65. Phil. thanks for your response about selecting strikes for the BCS. You indicated they were based on your projections for the stock price. I take that to describe how you pick the short call, what determines how far ITM for the long call?