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Monday Market Movement – Looking to Regain Some Upside Momentum

The turmoil continues

Already this morning the Futures were down 100 points but back to flat into 8am.  Of course, nothing that happens on a Monday has any meaning for the Markets as it's generally a low-volume affair with little news or data driving things towards real change.  We laid our our bounce lines for the major indexes last Thursday and congratulation to those of you who followed us into those longs and caught that nice rally into the weekend.  The summary of our bounce levels is:

  • Dow (/YM): 25,450 (weak) and 25,700 (strong) – now 25,317
  • S&P (/ES): 2,775 (weak) and 2,800 (strong) – now 2,766 
  • Nasdaq (/NQ): 7,100 (weak) and 7,250 (strong) – now 7,157 
  • Apple (AAPL): $223.50 (weak) and $226 (strong) – now $222 
  • Russell (/RTY):  Anything below 1,552 is catastrophic – now 1,545

That's right, I forgot about the Russell.  It was the small caps index that gave us the early indication the rally was breaking down and now they are going to give us an early indication as to whether this is the end of a small correction or just the beginning of a larger one.  

As you can see from the daily chart of the index, there's no recovery here at all in the broadly measured 2,000-stock index and these are the companies that are least able to adjust to the damage caused by Trade Wars and slowing US Consumer Spending so they do give us an early glimps of the things that will begin showing up in the S&P 500 over time.  

Meanwhile, we're skeptical about recoveries that occur on low-volume and without actual reasons – we much prefer to see the market move on upside reports or at least upside earnings surprises and not from single companies or even single sectors – like Friday's bank-driven rally.  For example, one of the recent hedges we added to our Short-Term Portfolio was featured in the 9/27 PSW Report, which was:

As I noted on Tuesday, we are already getting swamped by companies who are issuing negative guidance for Q3 and the good news is that's going to lower the expecations bar considerably, so it won't be as easy to disappoint but Bed Bath and Beyond just reported a rough quarter and that stock tumbled 15% after hours.  The Retail ETF (XRT) is trading at record highs – it was only at $22 before collapsing to $8 in 2008 and now it's at $52, so it makes a fun short if you are worried about Retail Stocks (and we are).  For our Short-Term Portfolio (STP) we can add the following hedge:

  • Sell 10 XRT Jan $52 calls for $1.85 ($1,850) 
  • Buy 20 XRT Jan $55 puts for $4.15 ($8,300) 
  • Sell 20 XRT Jan $50s for $1.45 ($2,900) 

That's net $3,550 on the $10,000 spread that's more than 1/2 in the money to start so the upside potential below $50 is $6,450 (181%), not bad for 3 months and a great way to hedge potential losses on retail stocks.  

As you can see, as of Friday's close, XRT was down at $47.42 and the spread, so far, is netting $7,780, which is already up $4,230 (119%) but still has another $2,220 (28.5%) left to gain if XRT stays below $50 and, so far, we haven't seen any good reason to cash in this hedge early though if XRT is back over $48, we're likely to take $7,000 and run – as we can always add another hedge.  Other hedges were discussed in great detail early this month in these two posts and of course, in the Weekly Webinar:

Chart-wise, things are already very ugly with only the Dow above its 200-day moving average now and the NYSE and Russell, the broader indexes, have massivley failed and are below their summer lows while the Dow, Nasdaq and S&P have another 5% to fall to catch up to the Russell and that would be very ugly indeed! 

Retail Sales were already a huge miss this morning at 0.1% vs 0.6% expected by leading Economorons and, if you take out Auto Sales, we're down to NEGATVIE 0.1%, the first negative number in the Trump Error.  

That's also WITH Gasoline Sales being up 14% from last year, not because we're driving more (we're driving less) but because gasoline is 16% more expensive than it was last year – and that's after the big sell-off so, back in September, it was closer to 25% more per gallon than last year or what President Trump calls – winning!  

Sears: Will It Shrink, or Close?Speaking of "winning" – Sears (SHLD) is finally, officially, Bankrupt and Eddie Lampert has stepped down as Chairman, which will allow his company to pick up all the assets for pennies on the Dollar – completing his total screw job of the investors and creditors who've suffered from his year's-long destruction of the once-great company.  

Unfortunately for the Retail Sector, this will cause Sears' $3Bn of inventory to be massively marked down right into the holidays, which will hurt their sales and then the companies that are waiting to get paid for that inventory will suffer in their earnings (as well as writing off Billions more in never-to-be-paid debt) and, of course, the mall operators will have to deal with a tsunami of empty space that may never be filled again and that then devalued the leases that are held by all retailers as the market rates plunge against their existing contracts.  

Sears: Will It Shrink, or Close?Don't forget Toys R Us also shut 800 large stores so the inventory of empty retail space in the US has never been higher and SHLD still employs 70,000 people, which will be a long-term blow to the jobs numbers as it won't happen all of a sudden but various debtors will take over various stores and begin unwinding things – so we'll have a drag on Q4 and Q1 earnings for connected companies in the very least – including those lenders who, ultimately, will also take major losses.

The last time I was in a Sears it was Wayne, NJ early this summer but only because they opened a Dave and Busters (PLAY) inside the store.  It was maybe the second time my kids had seen a Sears in their entire lives and not because we're snobby (they love TGT) but because "no one shops there" and, walking around what looked like a set from Dawn of the Dead – I wasn't surprised.  The shelves were already half bare and there was hardly any staff – consider that they only have about 100 people per large store which is generally open 80 hours a week – that's very thinly staffed!  

So I'm not sure what having a Bankruptcy sale will do for them.  Despite my encouragement to look around, both of my teenage girls came back empty from a walk around the aisles.  If kids don't want things, it doesn't matter how little you charge for them…

Sears was the Amazon of it's day.  The biggest building in Chicago is the Sears Tower and it was once the biggest building in the World.  Amazon doesn't have a tower…  We shorted Amazon last month and that worked out well as they failed at $2,050 (now $1,788) but today we'll wait and see how the bounce lines work out before we jump in and add more hedges.  It's a very quiet data week with only 3 Fed speakers and 2 of them are Bostic on Friday, after the Fed Minutes come out on Wednesday. 

We get the early earnings reporters and that will be interesting but not enough data to start betting on so it's mostly going to be a "watch and wait" week but that's good as we have 5 Member Portfolios to review:

 


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  1. Looks like an orchestrated bot move in the last hour of Friday to retake the 200 DMA. Too late for the NYSE and Russell though.


  2. I recall when some in the GOP where getting the base riled up because of the 47% who didn't pay taxes – separating the makers and the takers! Turns out that most of the supposed makers are the also the biggest takers:

    https://www.vox.com/policy-and-politics/2018/10/14/17975066/ny-times-jared-kushner-taxes-ivanka-trump

    Kushner also declared losses on properties he got with borrowed money, not his own funds. In other words, he was able to reduce his tax bill using other people’s money. Kushner’s father, Charles Kushner, also likely avoided federal income taxes from 2012 to 2016.

    No one gets upset though – perfectly legal. Mind you, the EIC is also perfectly legal, but it benefits poor people so it should be illegal.


  3. That trade war is not working – only adding taxes to the American population. Not surprisinglt, but China is playing smarter it seems:

    https://www.vox.com/2018/10/12/17967422/china-trade-war-us-trump-deficit

    America’s trade deficit with China reached a new high — $34.1 billion — in September. That’s a 13 percent increase compared to last year and is the second-straight record month after a deficit of $31 billion in August.

    That takes America’s trade deficit with China for the year to $225.8 billion — about $30 billion more than at the same point in 2017.

    This could prove to be a problem for Trump. Over the past year, America has placed about $200 billion worth of tariffs on Chinese goods, in part to make Chinese products more expensive so Americans don’t buy them.

    But Beijing has responded to the tariffs in kind, making it much harder for US companies to sell in the Chinese market. China has purposefully increased its exports to the US while, at the same time, it has stopped buying as much from US manufacturers.


  4. That's a surprising chart:

    My guess is that people who have more cash on hand can jump on better opportunities for higher returns during dips.


  5. Not the best indicator:

    https://www.bloomberg.com/view/articles/2018-10-11/stock-prices-drop-market-is-as-cheap-as-it-has-been-in-a-while

    The main caveat is that the situation could shift quickly. A low PEG ratio implies that earnings growth will continue to be as strong as it is now. That’s probably not the case. By next year, with the one-time boost of the tax cuts fading, earnings growth is expected to slow to just under 12 percent. Base current stock prices on next year’s expected earnings, and the PEG ratio jumps to 1.3, or slightly higher than the 1.2 it has averaged going back to 1986, according to Bank of America Merrill Lynch.

    For now, at least, stocks have wandered into bargain PEG ratio territory. But the ratio is built on faith. And this year, even as the economy has heated up, investors have become increasingly nervous about growing trade tensions, higher inflation and rising interest rates. That’s likely to continue to put their faith to the test.


  6. Phil,

    Looking to get back into /SI, /KC and /NG  longs. Where do you see good entry points?


  7. Good Morning!


  8. Megad deals are bad for credit ratings – unless you have tons of cash like Microsoft:


  9. Go BJO!


  10. MU – Starting to look interesting after pulling back 35% from its high.  Over the weekend, I read that David Tepper, a pretty smart guy, has 24% of his 8 billion dollar portfolio invested in MU.  Talk about a commitment !

    Phil, I believe you have a position on.  Any new trades ?  Thanks.


  11. Good morning!  

    Big Chart is NOT pretty and we're flat at the open so NOT GOOD so far. 

    Taxes/StJ – Such hypocricy!  Real Estate has all kinds of scams like that – it's one of the reasons most rich people get steered into real estate at some point – for the "tax advantages".  It's one of those tax loopholes that only the already-rich or well-connected can take advantage of.

    China/StJ – Trump is playing tick-tac-toe with Go grandmasters.  

    Image result for ape playing chess

    Surprising/StJ – Not really.  That's what I was saying here: "Record High Wednesday – We Will All Be Billionaires".  You can't make EVERYONE rich.  You can make a few people rich on paper but, the more people that try to take advantage of record market moves – the more people attempt to cash out and get real money but, since the paper market gains don't actually create real wealth – there's not enough wealth to trade the stocks back in for and the idiots left holding the bag at the top end up selling into a collapsing market. 

    The same thing happens to companies doing stock buybacks – they artificially inflate their own stock price until they are the only suckers still buying at the top and then the stock pulls back and it turns out they wasted billions overpaying for their own stock – it's idiotic.

    Longs/Japar – Well you are miles late on /KC, that's for sure! 

    I was banging the table on them all the way down to $100 but now I've completely lost interest other than our remaining BJO longs.  I don't think I could have talked more about how great that play was on the way down without just being annoying.

    Trading futures is about PATIENCE – you have to wait for something to get cheap for bad reasons.  At the moment, /SI isn't too bad as you can stop at $14.50 without catastrophic losses and it's lagging /YG on the way up – as well as all the other metals so that's the way I'd go.

    MU/Albo – Yes, it's in the LTP as a recent add and still playable:

    Long Call 2020 17-JAN 40.00 CALL [MU @ $41.89 $-0.58] 20 8/17/2018 (459) $26,000 $13.00 $-3.53 $13.00     $9.48 $-0.13 $-7,050 -27.1% $18,950
    Short Call 2020 17-JAN 55.00 CALL [MU @ $41.89 $-0.58] -20 8/17/2018 (459) $-10,000 $5.00 $-0.75     $4.25 $-0.20 $1,500 15.0% $-8,500
    Short Put 2020 17-JAN 42.00 PUT [MU @ $41.89 $-0.58] -15 8/17/2018 (459) $-7,500 $5.00 $2.00     $7.00 $0.10 $-3,000 -40.0% $-10,500

    Of course now we'll want to adjust it and 2021s are out so we'll probably roll the 2020 $40s at $9.50 ($19,000) to the 2021 $35s at $15 ($30,000) picking up $10,000 of intrinsic value plus a year for $11,000.  The short Jan $55s are still $4, so no way I'd buy them back and the short $42 puts are $7 and the 2020 $38 puts are $7 but still plenty of one-year premium in the 2020 puts, so no reason to change those either.  

    As a new trade for the OOP, I want to take advantage of the short 2020 $55s at $4.50 so:

    • Sell 10 2020 $55 calls for $4.50 ($4,500) 
    • Buy 20 2021 $45 ($11)/$60 ($6.50) bull call spreads at $4.50 ($9,000) 
    • Sell 10 2020 $35 puts for $5.50 ($5,500) 

    So we're starting this trade with a $1,000 credit and you have $31,000 upside potential if all goes well.  If MU goes higher, you're well-covered and can begin buying back short calls.  At $45, let's say they gain all $3 of the move and you buy back 3 for $7.50 – that's just $2,250 so you're in for $1,250 net and now triple-covered on the longs.  At $50 you buy back 3 more for $12.50 and that's $3,750 and you'd be then in the $30,000 spread for $5,000 with 4 short calls left against you.  

    So the upside case is just fine and flat is fine and down is fine because you have a credit and the worst case is you have to roll the puts but, if you don't REALLY want to own MU for net $34 – why would you be in this trade in the first place?

    Oh no, things are turning very ugly, Nas down 100 with AAPL down $4 (1.7%).  


  12. That's why the OOP does so well – we often go into LTP trades AFTER they go the wrong way so the OOP gets better entries than the LTP does by being more PATIENT! – which is by necessity as we don't have as much cash and margin to throw around. 


  13. Looks like MDR setting new low


  14. There are buy out rumors for bks. At a low-any trade here?


  15. RB/Phil- still holding on to RB? 


  16. BKS/Pirate – Yeah,  I know that play in stone tablets did really well just after papyrus got overbought too.  cheeky  They lost $125M on $3.6Bn in sales last year and that's a slow, steady, 10% annual decline they've been working on for ages.  In fact, the $125M loss wiped out the prior three years' earnings of $33M, $14M and $22M combined!   So far, this year, they've lost $59M in 3Qs – so things are looking up!   Even at $7, you're paying $500M for the company so they can lose 10-20% of your purchase price, not to mention the $1Bn in debt and, oh, their assets are… ROFL… unsold BOOKS!  

    /RB/Dave – No, $1.95 was my max pain point.  Might go back in at $1.90 as this still seems silly but yikes, what a disaster.

    MDR/Soma – That's why we took money and ran.  Very rocky when you try to run a combined company at first.

    Well, there was an attempt at a rally but it faded out.


  17. Phil-thanks for the insight on BKS. However, since it is one of my favorite places to shop and browse I can't help but think what a loss it would be without them. Reminds me of all the dooms ravings on SVU, BBY which are still my fav's and all are doing great (so far!) Getting things "cheaper" from AMZN are not in the cards for millions of us holdouts as it reminds me too much of of WALFART! Cheaper most definitely does not mean better.


  18. BKS/Pirate – I like BKS well enough but they killed the local bookshops, which is what I used to really love to do.  Book stores used to have personalities and carry things the shopkeeper thought were good to read and they were usually avid readers themselves.  That was a huge loss caused by BKS and now they are gone and we're left with nothing.  Efficiency isn't always good – people seem to forget that…


  19. Phil- Up here in the boondocks we still have bookstores who do resale & new books in the small towns. Ashland, Bayfield and Washburn have nice little book shops with coffee. In Duluth the B & N is always packed so maybe in different  demographic areas things are old fashioned. But we do have very active library's that share if someone makes a request. BTW you would enjoy THE President is Missing by Clinton and Patterson. Very interesting and worth the read. Thanks as always for everything you do!!


  20. Phil/sell off

    Good morning!

    According to Goldman, “the sell off is almost over”

    Can I start buying now?


  21. Oh for you MJ fans OGRMF just passed the 6 dollar mark. They are heavy in the oils and beverages. Cron is on the move too and has options.


  22. BKS kills local bookshops…  AMZN kills BKS… circle of life.  Though it will take an apocalypse to kill AMZN


  23. Tangled- I wouldn't be so sure. It wasn't that long ago that Sears was the most viable shopping enterprise in the country until Eddie of course. The only certainty is CHANGE, and taxes and death of course.


  24. Boondocks/Pirate – Well that's the charm of small towns but you're lucky then that BKS is getting killed off before it gets to you too!

    Goldman/Maya – Yes, because they only have YOUR best interests at heart.  wink

    OGRMF/Pirate – I love the 2018 $14.5M in revenues and a $1M loss for the year but projecting $118M in revenues next year with a $20M profit – who knew business was so easy?  

    Year End 31st Aug 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue C$m 0.000 0.000 0.000 0.99 6.13 5.71 12.8 14.5 118.4  
    Operating Profit C$m -0.38 -0.24 -8.27 -1.28 1.25 -11.2 5.83      
    Net Profit C$m -0.38 -0.24 -8.27 -1.28 0.85 -10.9 1.09 -0.71 20.9  
    EPS Reported C$ -0.051 -0.033 -0.26 -0.024 0.014 -0.11 0.004      
    EPS Normalised C$ -0.051 -0.009 -0.047 -0.045 -0.020 -0.098 -0.11 -0.008 0.14  
    EPS Growth %                    
    PE Ratio x           n/a n/a n/a 54.4  
    PEG x           n/a n/a n/a 0.46
    Profitability

    They burned through $54M of investor cash this year (so far) and are sitting on $100M in debt burning $22M last Q alone.  I think, based on OGRMF's $790M Market Cap, that we at PSWI must be Trillionaires from our stake in New Age Ventures!  This stuff is SO stupid!

    AMZN/Tangled, Pirate – How about Jetson-style 3-D printing at home?  You'll have the raw materials and a printer and you pay for a printing license whenever you want to buy something.  That should be the end of AMZN.  And, keep in mind that, 100 years ago, SHLD couldn't even imagine the internet with 1-day delivery while we already have 3D printers that are at about the stage of early laser printers when they were a "novelty but not very useful" – that was only about 35 years ago!  

    Image result for 3d printing food animated gif

    Image result for jetsons shopping animated gif

    Image result for jetsons shopping animated gif


  25. Phil-love the Jetson;s. Your so right. I think OGRMF is arranging leases etc with growers so of course with expanding there is a huge cash outlay. I think this is based on the Canada effect and the Europe opening the gates. I just think it is interesting and do not have much invested, but fun to dabble in. Talk about swings. Reminds me of bitcoin.


  26. Aapl

    Looks like the 50dma is holding but I would really like to see $204 print before I really buy. That level gets it back to the $1T valuation, shaving almost $200B off the high.

    Earnings, I am inclined to ignore he noise from the people who ‘are supposed to know it all’ and use the company issued guidance for decisions. Having said that, I don’t think the company saw the effects of a possible Chinese drop off at last earnings call….


  27. Tsla deposit returns

    Requested TSLA for a refund of my deposit of $5000 on the model X

    First, unable to do it myself online.

    Called them on Sept 10- was put on hold for 20 mins and then told there was a glitch in the system that did not allow processing online and that they would take care of it and return in 4 weeks.

    Called today, again a 20 mins hold. Now told that refund was never processed but they will do it today with a 60-90 business day processing time period.

    Very interesting….small claims court? Could be fun!


  28. Maya – Las Vegas…. I went last time, and I'm interested this time depending on the date….  Thank you for coordinating!


  29. Batman/Vegas

    Thanks

    Looking at weekends in Feb, will advise.


  30. 3D printing – so you think we have that level of 3D printing available before the apocalypse?  I admire your confidence.


  31. OGRMF – My favourite cannabis stock, and on a relative value basis very cheap.  Likely to move from TSX venture to full TSX listing as publicly speculated.  Have invested in a yeast-based company that will be creating cannabis (similar to CRON) and have partnered with other companies doing innovations.  Very impressive cost per gram and I believe are a leader here in terms of yield.  They aren't screwing around and are even building their own power substations to endure their production is protected.  One site for their plant with lots of room to grow in low cost New Brunswick has significant advantages.  Chairman was a Senior VP at Molson Coors and knows the beer business well and will only take a good deal.  They are a great candidate for a take-out by one of the larger cannabis players as well.  




  32. US budget deficit hits highest level in 6 years




  33. AAPL/Maya – I'll be thrilled if they have a nice pullback.

    TSLA/Maya – I hope they are still there in 90 days! 

    3D/Tangled – I am always a tech optimist, having seen such great changes in my brief time on Earth already.

    Yeast/Stu – What's the company about?  Do you have any links?

    /RB almost back to $1.95 – I'll have to get back in if they get over.

    Nasty sell-off on the equities in the past 30 mins – not much time left!


  34. TSLA/90 days

    They WILL be around but I may not be my money back.

    We need more positions in TSLA.

    I am of opinion that it goes to $150, then gets bought out by AMZN! The latter can then deliver in TSLA trucks and electric planes 


  35. Comment content omitted because it is too long.


    • The Atlanta Fed tracker now sees Q3 real GDP growth at 4.0%, down from 4.2% on 12-Oct.
    • Its Q3 forecast of real personal consumption expenditures was cut to 3.3% from 3.6%.
    • Press Release

    • Comex gold futures rose modestly, closing +0.7% at $1,230.30/oz., but it was enough to send the yellow metal to its highest finish for a most-active contract since July 31.
    • "We have a bullish outlook through the end of the year and into next year," says HSBC precious metals analyst Jim Steel. "Our average is $1,274/oz. this year, which means we'd continue to have a drive up into the end of the year."
    • Last week's stock market selloff has been a factor in gold's rise, as well as the drop in the 10-year yield from a recent 3.25% back to 3.15%, says Bart Melek, head of commodities strategy at TD Securities, but the risk-off move may have given way to another catalyst: "Now there's a view the Fed might not be as aggressive" in raising rates, he says.
    • Meanwhile, last week’s positive reversal for gold left much of the market wrong-footed, helping accelerate the move, according to Saxo Bank's Ole Hansen.
    • Gold mining stocks are broadly higher: ABX +2.4%NEM +2.2%GOLD +2.7%AEM +2.3%GG +0.9%FNV +1.4%.
    • Bloomberg reports that Walmart (NYSE:WMT) could add more services to its Vudu streaming platform to compete with Amazon’s (NASDAQ:AMZN) Video Marketplace.  
    • Walmart acquired Vudu eight years ago. The retailer is now focusing on building out the business including deals for original programming and brainstorming on a potential streaming service like Netflix. 
    • Previously: Walmart to boost video-on-demand service Vudu (Oct. 8)
    • PG&E (PCG +1.8%) took the unprecedented step over the weekend of cutting electricity for tens of thousands of customers in an attempt to prevent wildfires in its northern California service area during high winds and dry conditions.
    • Pacific Gas & Electric says it began turning off the power for 87K customers Sunday night and that more could be put in the dark depending on the weather before it restores power tonight, although some residents will not get their electricity back until Tuesday.
    • The National Weather Service predicted winds gusting to 55 mph in the Sierra foothills east of Sacramento, and high winds were expected in the state's wine country north of San Francisco.
    • PG&E said it made the decision to turn off power "as a last resort given the extreme fire danger conditions these communities are experiencing."
    • General Electric (GE -0.9%) ticks lower as Cowen analyst Gautam Khanna cuts his stock price target to $12 from $14.50 while maintaining a Market Perform rating, expecting new CEO Larry Culp will impose a dividend cut and perhaps raise more equity to shore up the balance sheet.
    • Khanna expects "may do what prior CEO Flannery didn't: shore up the balance sheet, quickly, to allow for more flexibility to operate… GE's high leverage, amplified by anemic FCF, long cycle markets and 'unknowable' cash calls (insurance, Power fixes, etc.) is the albatross that we expect Culp to address early."
    • Meanwhile, Barclays analyst Julian Mitchell, who recently upgraded shares to Overweight with a $16 target, says a dividend cut and equity raise could trigger selling, but he sees such pressure as short lived, and notes other stock resets in his coverage such as Dover (NYSE:DOV) and Fortive (NYSE:FTV) did not play out as badly as bears predicted.
    • As for the recent deferral of Q3 results, Mitchell thinks the move raises the likelihood that Culp will be able to provide more insight into GE’s future rather than just retreading what has happened previously.
    • Noted Apple (NASDAQ:AAPL) analyst Ming-Chi Kuo expects the iPhone XR to ship 36M to 38M units in Q4, up from the original 33M to 35M estimate.
    • Kuo expects the XR to drive upgrades in China and outsell the iPhone 8 because of the larger display, longer battery life, and dual-SIM support. 
    • Kuo expects total iPhone units to hit 75M to 80M in Q4.
    • In Q1, total shipments are expected from 55M to 60M units, a 10% Y/Y growth. The first quarter is seasonably weak, but 2019 could have a Q/Q drop of 25% to 30% compared to last year’s 45% to 50% based on the strength of the XR.
    • Pre-orders for the XR start on October 19 with shipping on October 26.   
    • Apple shares are down 1.4% on this morning’s analyst expectations of weakening demand in China.    
    • Previously: Ming-Chi Kuo: iPhone XS Max has 4x sales of XS (Sept. 24)
    • Previously: Goldman sees "rapidly slowing" iPhone demand in China (Oct. 15)
    • Boyd Gaming (BYD +0.1%) Keith Smith weighs in on the addition of four new properties from the Pinnacle deal.
    • "By adding these four high-quality properties, we have significantly expanded our portfolio and enhanced our free cash flow profile at a compelling multiple," notes Smith.
    • "We have gained a strong presence in three of the Midwest's largest gaming markets, with access to millions of potential new customers," he adds.
    • Boyd entered a master lease arrangement with Gaming and Leisure Properties in connection to the new properties.
    • Source: Press Release
    • The FDA has issued two guidance documents that it says should help make the drug development process more efficient.
    • The first addresses the use of minimal residual disease (MRD) as a biomarker in clinical trials for certain blood cancers. The agency believes it clarifies how best to use MRD as a general measure of tumor burden or assess the likelihood of relapse.
    • The second is final guidance on the regulatory framework for finding treatments that address underlying molecular changes that cause or contribute to disease (e.g., gene therapies). It includes an approach for drug developers for enrolling patients with rare genetic variants in clinical trials and the evidence required to demonstrate efficacy.
    • Fidelity Investments announces that it's getting into crypto by starting a new unit, Fidelity Digital Assets Services, to manage digital assets for hedge funds, family offices, and trading firms.
    • It will offer security and storage services, trade execution and client support services.
    • "Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors," says Abigail P. Johnson, chairman and CEO of Fidelity Investments. "We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use."
    • The new unit, now a stand-alone business, started in the Blockchain Incubator at Fidelity, which began in 2013. The incubator continues to research and experiment with blockchain and digital assets.
    • Previously: Goldman Sachs considering offering custody for crypto funds: Bloomberg (Aug. 6)
    • Whirlpool (WHR +2.1%) expects a "very limited" impact on earnings from the bankruptcy of Sears Holdings.
    • The company says it had about $30M in accounts receivable exposure to Sears at the time of the filing.
    • "In the past, when faced with a potential volume reduction from any one particular segment of our trade distribution network, we generally have been able to offset such declines through increased sales throughout our broad distribution network," updates Whirlpool management.
    • Whirlpool doesn't expect to revise 2018 EPS guidance due to the Sears store closings.
    • SEC Form 8-K
    • The Technology Select Sector SPDR Fund (NYSEARCA:XLK) is down 1.1%. S&P 500 IT Index is down 1.2%. The tech heavy Nasdaq 100 drops 1% and the Philadelphia Semiconductor Index is down 0.5%.
    • Movers with no clear catalysts: (XRX +1.9%), (DBD -0.5%), (KOPN +2.4%), (SYMC +1%).
    • Internet and Software stocks are feeling the most pressure with Netflix -2.2% down ahead of earnings, Adobe -3.3% down on its event day, and Hortonworks -3.4% and Cloudera-3.1% pulling back from their post-merger announcement gains. Apple -2.1% is also weighing down FAANG after a negative analyst note this morning about Chinese demand
    • Total (TOT +0.7%underscores its commitment to Russia despite fears over U.S. sanctions and geopolitical pressures that have sparked a steady retreat by other foreign energy majors, as CEO Patrick Pouyanné says he wants the company to be Russia's largest foreign oil and gas player.
    • The CEO made his comments today at the launch of a lubricant factory outside Moscow, TOT's newest investment in Russia.
    • TOT’s biggest exposure to Russia is its 19.4% stake in gas producer Novatek and a 20% interest in $27B Yamal LNG project in the Arctic; this summer, TOT said it would buy a 10% stake in Novatek’s new Arctic LNG 2 project.
    • SUPERVALU (NYSE:SVU): Q2 EPS of -$1.41 may not be comparable to consensus of $0.32.
    • Revenue of $3.51B (+1.7% Y/Y) misses by $70M.
    • Shares -0.01%
    • 10-Q

    • Janet Yellen, who ran the Federal Reserve for four years, says that President Trump's critical remarks about Federal Reserve policy could be damaging to the central bank, Bloomberg reports.
    • “To politicize it and to undermine that is something that is essentially damaging to the Fed and to financial stability,” Yellen said in Washington at the Mortgage Bankers Association's annual convention.
    • "Presidents can speak out if they choose to and give their opinions about policy. There’s no law against that, but I don’t think it’s wise," she added.
    • Still, she doesn't think Trump's criticism of the Fed raising interest rates will change the Fed's actions and she defended her successor, Jerome Powell.
    • The Fed last increased its benchmark interest rate last month, raising it by 25 basis points to 2.0%-2.25%. It's widely expected to hike interest rates again in December.
    • The 10-year U.S. Treasury note yield is up 0.8 basis point to 3.16% in midday trading; Financial Select Sector SPDR ETF (NYSEARCA:XLF-0.09%
    • Activision Blizzard (ATVI -3.8%), Electronic Arts (EA -0.8%) and Take-Two Interactive Software (TTWO -1.9%) are all lower on heightened concerns over Beijing's freeze on new titles.
    • Financial Times reports Chinese videogame execs don't expect the resumption of license approvals until sometime next year.
    • Tencent Holdings (OTCPK:TCEHYOTCPK:TCTZF) closed down 2% in Hong Kong today, while the U.S. ADRs are off ~5%.
    • Gaming chip manufacturer Nvidia is down 3.37% on the day.
    • Credit Suisse downgrades the U.S. steel sector, expecting prices to fall due to oversupply stemming from the Trump administration’s tariffs on Chinese imports.
    • The firm lowers its rating on the sector to Market Weight from Overweight, saying capital spending by firms has “disappointed” investors, and downgrades Nucor (NUE -0.4%), Steel Dynamics (STLD -0.7%) and Cleveland-Cliffs (CLF -1.2%) to Neutral from Outperform.
    • The ongoing U.S. talks with Canada on tariffs related to steel and aluminum also could add to the oversupply of the commodity, Credit Suisse says, seeing odds favoring a deal by early 2019.
    • ETF: SLX
    • Amazon (AMZN -2.6%debuts a retail site for official products featured on the hit show “Shark Tank.”
    • Amazon gets to showcase the products and entrepreneurs get a $15K Amazon Web Services credit. 
    • The collection includes over 70 products that received funding in seasons 1 through 9. New products from current seasons will appear in the future. 
    • Shoppers can sort and filter products based on how many sharks provided backing and the amount of funding.  
    • Previously: Travelers launches Amazon shop for discounted home devices (Oct. 10)
    • Shares of Manchester United (NYSE:MANU) are up 2.92% after The Sun reports that Saudi Arabia Crown Prince Mohammad bin Salman want to make what's called by the daily publication as a "massive" investment in the soccer club.
    • It's unclear if the Glazer family is interested in selling all or part of Manchester United.
    • Raymond James reels in its price target on Netflix (NFLX -2.9%) to factor in "higher discount rates" in an elevated interest rate environment.
    • The PT from Raymond James on Netflix is lowered to $400 from $445.
    • Goldman Sachs also lowered its high-flying expectation on NFLX, taking its price target down to $430 from $470.
    • Netflix is due to report earnings tomorrow after the closing bell.
    • After the bankruptcy filings of Sears Holdings (SHLD -13.8%) and Toys "R" Us, the spotlightturns to where the retailers' holiday sales will go this year.
    • Analysts think Target (TGT -0.1%), Amazon (AMZN -1.9%), Dollar Tree (DLTR -0.8%) and Walmart (WMT -0.4%) will gobble up the most toy sales, while Sears appliance sales are seen going to Home Depot (HD), Lowe's (LOW -0.2%) and Best Buy (BBY +1.5%).
    • Apparel sales out of Sears aren't expected to transfer over to department store rivals at quite the same rate, although incremental gains are seen for J.C. Penney (JCP -4%), Macy's (M +0.6%) and Kohl's (KSS -0.3%).
    • Seritage Growth Properties (SRG -1.6%) falls after Sears Holdings (SHLD -14%) files for Chapter 11 bankruptcy.
    • SRG says non-Sears tenants now represent about 70% of signed lease income, up from 20% at its start.
    • As of Sept. 30, 2018, Sears Holdings was a tenant in 82 properties under the Master Lease and 20 properties under the JV Master Leases, representing about $61.2M of annual base rent, or 31.4% of all base rent under signed leases.
    • The 3.5x-4.5x rental uplift SRG has historically achieved upon re-leasing space formerly occupied by Sears Holdings allows it to recover all rental income generated from SHLD by re-leasing only 25%-35% of formerly occupied space and deploying the capital required to bring the rental income online.
    • Seritage says  it has almost $1.0B of cash on hand and committed capital to fund development activity and operations.
    • The REIT started in 2015 when it bought 235 properties and 31 joint ventures interests from Sears Holdings. At that time, under a master lease pact, Seritage leased back all but 11 of those properties to SHLD.
    • Previously: Kimco sees opportunities after Sears bankruptcy filing (Oct. 15)
    • Previously: Sears files for Chapter 11 bankruptcy (Oct. 15)
    • Crude oil prices rise only modestly amid rapidly escalating tensions between the U.S. and Saudi Arabia over the disappearance and alleged murder of Washington Post columnist Jamal Khashoggi at the Saudi consulate in Istanbul; U.S. WTI +0.3% to $71.58/bbl, Brent +0.3% to $80.68/bbl.
    • Pres. Trump says Saudi King Salman denies knowing what happened to Khashoggi; Trump says he is sending Sec. of State Pompeo to meet the king.
    • Turkish authorities say they reached an agreement with Saudi Arabia to search the kingdom’s consulate in Istanbul for Khashoggi, a sign that the countries are seeking to avoid direct confrontation over the incident.
    • Goldman Sachs reiterates its long call on crude oil, as the "potential magnitude of supply shortfalls from Iran in the short term or Saudi potentially outweighs for now a backdrop of weaker fundamentals and increased macro uncertainty."
    • Despite a Saudi threat of higher crude prices if the U.S.  pushes too far, most analysts believe it is difficult to imagine Saudi Arabia taking action that would hit world oil supply.
    • Also, crude markets are supported by data that shows South Korea did not import any oil from Iran in September for the first time in six years, before U.S. sanctions against Iran take effect in November.
    • Goldman Sachs (GS +1.1%)Q3 EPS consensus estimate of $5.38, revenue estimate of $8.35B. EPS exceeded consensus in all but one quarter in the past eight quarters. Beats have ranged from 5.4% for Q4 2016 to 29% for Q3 2016. It missed consensus by 0.4% for Q1 2017. The last beat, Q2 2018, was by 28%.
    • It will be the first earnings release since David Solomon took over as CEO, but reflects the last quarter under Lloyd Blankfein's reign, so investors will be looking for clues how Solomon's strategy for growing the company. They'll also be looking at the company's Marcus online consumer banking operations after reports that it's scaling back on loan-origination targets for next year.
    • Morgan Stanley (MS +0.5%) Q3 EPS consensus estimate of $1.45; revenue estimate of $9.54B; has exceeded consensus in each of the past eight quarters, with results beating by 9% to almost 29%. Q2 2018 EPS exceeded consensus by 17%.
    • Its investment-banking business is expected to perform better than its peers, although it's likely to decline on Q/Q basis. Investors will also be looking at how wealth management revenue fares as it's been declining for a few quarters.
    • BlackRock (BLKQ3 EPS consensus estimate $6.87; revenue estimate of $3.64B. In the past eight quarters, BlackRock has missed consensus three times, with the most recent miss for Q2 2017, when it fell short by 2.8%. In Q2 2018, BLK beat consensus by 4.7%.
    • Being an asset manager, flows, of course, are crucial for BlackRock, and in Q2 they were disappointing. Growth in the ETF industry should fuel its iShares business. And while still small, its Aladdin platform platform may become more of a driver down the road.
    • Previously: More on Bank of America Q3 (Oct. 15)

  36. It's really fascinating to see Trump dance around the Saudi journalist questions like he does with questions on Russia. Now it's down to rogue agents! As usual, one has to suspect that there is something personal involved like loans to the Trump organization. The guy is compromised in so many ways. If he weren't POTUS, he would be denied a low level clearance.


  37. TSLA/Maya – That would be a nice save for them.  $150 is where I might actually want to look at them long but anything above that I have no interest in but, sadly, too scary to short at $260.  

    Super-dive right into the close gives us a very ugly finish back at the day's lows. 

    Not sure if someone said something or that was just a lot of selling pressure into the close – volume spike was pretty good. 

    Trump/StJ – It's insane how compromised the Presidency is!  It is a real National Security issue and you would think the "Conservatives" would care about that but all they really care about is POWER – doesn't matter how they get it.  I can't imagine there's many people left who can't see that now.

    That's just this weekend! 


  38. Trump said we would be tried of winning! He forgot to say winning by any means (even illegal) or at any costs (for example, lives). That seems to be the way for conservatives now since they can't win popular votes anymore.


  39. Phil, I currently have SQQQ 13/19 Dec BCS (from the times I could still buy ETFs…). It was losing money but now made it back "0" (it was bought for $1.23 and about the same price now with SQQQ at 13.83). What would be your thinking process for when to close it? For me, that's also the last hedge I could have and will need to invent other ways from Dec given that one can't buy any US ETFs in Europe anymore).






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