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Monday Market Madness – IBM’s $33Bn Shopping Spree Gives Tech Investors Hope

Hope.

It's a powerful thing.  IBM (IBM) announced over the weekend that they will be buying Red Hat Softwars (RHT) for $33Bn which is more than 50% over Friday's $20 close at $116.  I noted in our chat room this morning that $33Bn may have seemed less ridiculous as IBM began negotiating with RHT, probably over the summer as RHT had just been at that valuation – though the people who valued them there were IDIOTS, of course.  

RHT has $3Bn in earnings and $250M in profit.  If it were an IBM division it would have been shut down years ago as not worth keeping but IBM sees RHT as leverage as their customers are the customers of Amazon (AMZN), Microsoft (MSFT) and pretty much all the other cloud providers and that gives the mighty IBM sales force a foot in the door to leverage the 10s of Billions of Dollars they spend on cloud services and THAT is why this deal makes sense for IBM.  

Image result for rometty ibm cartoonIt's also a brave and confident move by IBM CEO Ginny Rometty and it's the kind of thing woman CEOs do that men almost certainly would not, which is make a move that carries a lot of personal risk for them, has no immediate payback but paves the way for the company to be much healthier in the distant future.  It's a nurturing move and the question now is whether she will be tarred and feathered for making it but predominantly male investors and analysts.  

We're in a fairly painful IBM position in our Long-Term Portfolio as we sold 5 2020 $145 puts in January for $12.50 to net in at $132.50 but this morning IBM will open around $120 so we're down about $6,250 (100%) on those.  We also bought 15 2020 $120/150 bull call spreads for $14 ($21,000) back in July and yes, we still have all of next year but now net $9 is down $6,000 on that end too – ouch!   

I think a lot of short-term investors may pull the plug but I have long-term faith so, most likely, we'll rescue $13 from the 15 2020 $120 calls ($19,500) and pick up 25 of the 2021 $110 ($20)/$140 ($7) bull call spreads ($32,500) so we'll sprend $13,000 more but now we have 25 spreads that are $10 in the money so $25,000 and pays up to $75,000 against our net $34,000 total investment if all goes well and, of course, we'll make some short call sales along the way – but not when they are below $140.

As to the short puts, we'll leave them for now as $145 in a year is not a crazy target and we'll roll them along to 2021 or 2022 if we have to because, as I said, this is a long-term play in our Long-Term Portfolio.  IBM's Watson has been quietly taking on more and more tasks (nice list here) and you can even use Watson to help coach your fantasy football team now.   IBM has a very long-term strategy to put Watson in everyone's hands and get people used to using it – at home and at work.  

Image result for ai market growthArtificial Intelligence is barely a $1Bn market in 2018 but is projected to be almost $12Bn in 6 years and $36Bn by 2025 so yes, the time is now for IBM to make their moves to dominate the AI and Cloud Spaces – and that's what this Red Hat deal is all about.  Rometty is banking on being able to show some progress next year as AI doubles – even as cloud growth begins to slow (who isn't in the cloud now?) and, after making less than $6Bn in 2017, IBM has made $6.7Bn in the first 3 quarters of 2018 yet you can buy the whold company for $112Bn, just 12.4 times likely $9Bn in current earnings.

That's the kind of company we like to have in our Long-Term Portfolio – the kind that MAKES MONEY!  Last time IBM tested $120 was early 2016, when they began their turnaround program and I was banging the table hard for them at the time.  They since popped back to $180 but now $120 again and again I am banging the table for an IBM investment as they are clearly being sold off by short-term traders – to the great advantage of long-term investors.  

Meanwhile, the markets are popping this morning as China says they are considering a 50% tax cut on Autos with engines smaller than 1.6 liters to help offset a steep decline in auto sales.  At the same time, Goldman Sachs (GS) is upgrarding Ford (F), which is another one I've been banging the table on, with a price target of $12, which is our price target as well.  In fact, in our 10/19 Long-Term Portfolio Review, I said:

F Ford Motor Co. 3000 2/6/2018 265 $31,350 $10.45 $-1.47 $9.30     $8.98 $0.00 $-4,410 -14.1% $26,940
Short Put 2020 17-JAN 11.87 PUT [F @ $8.98 $0.00] -20 2/6/2018 (445) $-5,500 $2.75 $0.53     $3.28 $-0.13 $-1,050 -19.1% $-6,550

F – Ridiculously low at $8.50.  If we buy 3,000 more we average $9.50 but let's just sell 30 of the 2021 $10 puts for $2.60 ($7,800) so the worst thing that happens is we're assigned 3,000 more at net $7.40 and our average would be $8.925 on 6,000 shares.  Meanwhile, it lowers our cost basis on 3,000 to $18,050 or $6/share so hitting our original goal at $11.87 would be a double if they recover. 

So, buy selling 3,000 2021 $10 puts for $2.60, we were collecting $2.60 ($7,800) now in exchange for promising to buy 3,000 shares of Ford for $10 ($30,000) which would make our net cost per share $7.40, so effectively we were promising to double down if F got $1 cheaper than it was at the time.

That's all put options are, promises to buy a stock for a certain price down the road and the person who owns the stock PAYS YOU to make that promise – as it's insurance for him that he'll get no less than whatever for his stock.  In this case, with F at $8.50 at the time, the person who owns 3,000 shares of Ford may be willing to pay $2.40 to guarantee they can sell it for $10 in two years becasue net they are paying less than $1 for the guarantee and F pays an 0.60 dividend so he'll collect $1.20 while waiting to collect his $10 – not a bad deal for him or us!  

Options are not complicated, they only seem complicated because most people can't explain them well.  Also, most option services want them to seem complicated so you will pay them to tell you what to do.  We see the options more like tools and we teach you how to use them to build portfolios instead but you're never going to learn to build a portfolio if you don't even understand the tools, right?

It's a medium data week with lots of earnings reports and only one Fed speakers so it's all about earnings this week and we'll see if they are good enough to get us back over our bounce lines but – don't bet on it.  Next week, of course, it's all about the mid-terms so, lots of crazyiness ahead!

 

 


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  1. Goldman Sachs sees +30% upside on Ford

    Oct. 29, 2018 7:31 AM ET|About: Ford Motor Company (F)|By: Clark Schultz, SA News Editor 

    Goldman Sachs upgrades Ford (NYSE:F) to a Buy rating after the having the automaker stuck in Neutral.

    "While we still expect a downward earnings trajectory into 2019 (North America profit under-pressure), we believe next year will represent trough earnings and the combination of a refreshed product cadence globally as well as cost improvements from strategic initiatives will begin to take hold," writes analyst David Tamberrino.

    Goldman lifts its price target on Ford to $12 from $9.


  2. Someone should mention to Trump that the market never had a negative return under Obama just for fun!


  3. Which model should we choose:

    https://ritholtz.com/2018/10/take-california/

    In the five years before Donald Trump was elected president in 2016, no state economy performed worse than Kansas. Things became so bad that Kansas decided to simply stop updating the public about state economic news. There’s no reason to do this other than to obscure the obvious: Kansas’s wounds were self-inflicted.

    Compare that record with California’s robust economy, increased tax base, balanced budget and job growth that exceeds the national average. The president may criticize the politics of the state, but there is little to find fault with its economy. If California were its own country, its $2.75 trillion economy and would be the world’s fifth largest, after the U.S., China, Japan and Germany.

    Yet despite the obvious failures in Kansas, Trump has championed that state, and not California, as his preferred model for economic growth via big tax cuts and deregulation.


  4. The irony will I am sure escape most people – they blame the wrong people for their problems:

    https://theintercept.com/2018/10/26/cesar-sayoc-foreclosure-steven-mnuchin/

    CESAR SAYOC, THE Donald Trump-loving Floridian who was taken into custody in relation to pipe bombs mailed to prominent Democrats, was foreclosed on in 2009 by a bank whose principal owner and chair is now Trump’s treasury secretary, Steven Mnuchin.

    The documents used to enact the foreclosure were signed by a prominent robo-signer and seemingly backdated. Nonetheless, the evidence was good enough for the famously inattentive Florida foreclosure courts to wave the case through. Years later, Sayoc became a supporter of Trump, who came into office and appointed a treasury secretary who ran the bank that snatched Sayoc’s house.

    They keep voting against their economic self interest!


  5. Good Morning.



  6. Phil AMZN Nov 16 2050 short put was assigned possible over the week end. Would you recommened to hold the stock for a while as there where only 2 options in play still have the 2100 long  Nov 16 puts. Surely AMZN got knocked good. 


  7. Good morning!  

    Big jack-up in the Futures but failing those key levels (except the RUT, which is over 1,500 at the moment) so far.  Same bounce lines as last week, which were:

    • Dow (/YM24,800 (weak) and 25,300 (strong) 
    • S&P (/ES2,710 (weak) and 2,780 (strong)
    • Nasdaq (/NQ7,080 (weak) and 7,230 (strong) 
    • Russell (/RTY1,530 (weak) and 1,575 (strong)

    Even with the Window dressing – it's going to be a lot of work to get those lines back.

    F/Albo – These analysts are such morons.  Nomura just lowered them to $9 on 8/14:

    Ford price target lowered to $9 from $10 at Nomura Instinet F – The Fly – https://thefly.com/…/entry…/F-Ford-price-target-lowered-to--from--at-Nomura-Instine…

    And Buckingham just lowered them last week:

    Ford (F) PT Lowered to $9 at Buckingham Research – StreetInsider

    https://www.streetinsider.com/Analyst+PT+Change/Ford…/14742873.html

    And, of course, Zero Hedge loves to extrapolate doom and gloom:

    Goldman Warns Of A Default Wave As $1.3 Trillion In Debt Is Set To …

    https://www.zerohedge.com/…/goldman-warns-default-wave-13-trillion-debt-set-matu…

    Big Chart – Keep in mind NDX is still over the 25% line – what sell-off?   Failing at 30% now though (7,000) will not be a good sign and then if we fail 25% at 6,750 – look out below!  

    Self-interest/StJ – Well, these are not very bright people…

    • Auto supplier stocks are roaring higher on news that China may lower the sales tax on new autos in a measure to support the industry.
    • Notable gainers in morning trading include Aptiv (NYSE:APTV+6.8%, Autoliv (NYSE:ALV+6.1%, STMElectronics (NYSE:STM+6.2%, Delphi Technologies (NYSE:DLPH+7.5%, Visteon (NYSE:VC) +6.9%, BorgWarner (NYSE:BWA+6.9%, Magna International (NYSE:MGA+4.5% and Veoneer (NYSE:VNE+4.5%.
    • Previously: Auto stocks rally with China considering sales tax cut (Oct. 29)
    • Investors in General Electric (NYSE:GE) are bracing for the company to slash or suspend its dividend when it reports quarterly earnings tomorrow, but some investors may take that as good news.
    • "Given GE's grim cash backdrop, the bigger the cut the better, in our opinion," said John Inch, an analyst with Gordon Haskett Research Advisors.
    • "GE's current and future free-cash generation prospects are not sufficient to support the dividend," said Martin Sankey, a senior research analyst at Neuberger Berman. "Prudence would call for the cut to occur sooner rather than later."
    • The company already planned to reduce the annual dividend of $0.48 a share after spinning off its healthcare business, a move that isn't expected to be completed until after this year. But earlier this month, GE warned that cash flow and earnings would fall below its 2018 goals because of its struggling power division.
    • GE +1% premarket
    • After a nasty result for her CDU party in a regional election over the weekend, German Chancellor Angela Merkel minutes ago announced her intention to retire from politics. Not going quietly, Merkel says she intends to serve until her term expires in 2021, citing need for her expertise in challenges like Brexit and the INF treaty (her coalition partners might have something to say about that).
    • A politician to the end, Merkel claims she made the decision to exit over the summer.
    • Already nicely higher for the day, European stocks have modestly added to gains, with the Stoxx 600 now up 1.65%. Germany's Dax is up more than 2%.
    • Previously: Germany's Merkel to exit: Bloomberg (Oct. 29)
    • Previously: Merkel coalition dealt another setback (Oct. 29)
    • German Health Minister Jens Spahn, a critic of German Chancellor Angela Merkel, and Annegret Kramp-Karrenbauer, a close Merkel ally, will run to succeed Merkel as leader of the Christian Democrats party.
    • Merkel announced Monday that she won't stand for re-election as party leader in December or as chancellor in 2021.
    • Previously: German Chancellor Angela Merkel won't seek re-election: Bloomberg (Oct. 29)
    Income up 0.2%, spending up 0.4% – how long can that last?  Core PCE beats estimates
    • September Personal Income and Outlays: Income +0.2% M/M +0.4% consensus, +0.4% prior (revised).
    • Consumer spending +0.4% M/M in-line with consensus, +0.5% prior (revised).
    • Core PCE Price Index +0.3% M/M with +0.1% consensus, +0.4% prior (revised).
    • Given the big run higher in Brazilian shares in the run-up to this weekend's presidential election, some may have thought investors would sell the expected news of a victory by the capitalist-friendly Bolsonaro.
    • But that's not the case so far, with Bovespa futures ahead 4.1%, and the real up more than 1% vs. the dollar. The iShares MSCI Brazil Capped ETF (NYSEARCA:EWZ) is higher by 6.25%.
    • More premarket action: ITUB +7.6%NIHD +5.7%VALE +3.9%PBR +9.2%BSBR +4.5%BBD +6.9%GOL +13.15%
    • HempAmericana (OTCPK:HMPQannounces the retirement of all outstanding convertible debt through a recent transaction. The Company’s balance sheet now carries no secured or unsecured debt.
    • Salvador Rosillo, HempAmericana CEO, commented, “The Micro-Cap space is dominated by large Convertible obligations. It has long been the structure of choice by many funds for capital allocation to small publicly-traded companies. However, it can result in serious dilution risk for common equity holders. I am very proud to let our shareholders know that the HempAmericana balance sheet is now completely free of this burden.”
    • Jefferies gives Apple (NASDAQ:AAPL) a Buy rating and a $265 price target (22% premium) on its “stable iPhone business” that can serve as the foundation for building a “massive, recurring and high margin Services business.”
    • Analyst Timothy O’Shea thinks Services could make up 25% of Apple revenue by FY20 and 40% of the gross profit led by App Store and Apple Music.
    • O’Shea: “Applying a higher multiple compared to the lower margin hardware business, we see a significant opportunity for investors as Services alone could be worth $111 to $177 per share by that time.” 
    • AAPL is up 1.4% to $219.34.  
    • New York Attorney General Barbara Underwood is stepping up its probe into T-Mobile's (NASDAQ:TMUS) proposed merger with Sprint (NYSE:S), concerned that the wireless giants could hike prices on cheaper prepaid services if they combined, sources told the New York Post.
    • Last week, the FCC revealed in a public notice that Underwood’s office issued a subpoena to the FCC seeking all materials T-Mobile has submitted since announcing the merger.
    • New York intends to share those materials with other state attorneys general that are investigating the merger.

    GE: $67 Billion Evaporates 


  8. AMZN/Yodi – I want to clarify.  You SOLD a Nov $2,050 put on AMZN and it got assigned and now you are long AMZN at $2,050 less what you sold the put for?

      

    I'm no fan of AMZN, we were selling calls at that price, not puts so please be very clear about what you actually have.  To me, $1,650 is still no bargain as that's still $800Bn for a company with $200Bn  in revenues and $8Bn in profits if all goes very well this year.  That's still 100x earnings at a time when Tech investors are waking up and realizing how ridiculous that seems.  


  9. Also, with AMZN, keep in mind the earnings growth is from cloud and cloud is crowding up while on-line retail is still a money-loser to the point where AMZN plans to open 3,000 physical stores in the next few years, which turns them more and more into a typical low-margin retailer who is lucky to get a 20x p/e so, unless they are going to turn $8Bn in earnings into $40Bn in the next few years, I think $800Bn is ridiculous for them now.


  10. Phil We set up the Nov Vertical 2x  2100 /2050 Buy 2100 and sell 2050 and sell 1 x sell Nov 2200 call !!!


  11. AMZN/Yodi – Oh, you sold the put that was covered by the higher put?  That's fine then.  All they did was cancel what's left of the premium, you'll still net out where you should and you could try to time it out but that's very tricky.  The Nov $2100 puts are $460, so net $1,640 is what you can net out for if you execute them so even on the long put and the assigned stock and whatever you sold the short put for is what you have gained.  In the STP, we sold the 2050 puts for $113 and the net of the spread was $22 so net net gain of $91 x 3 ($27,300) and the two short calls were sold for $8,500 so, all in all, a good ride!  

    If you want to make it interesting, you could, since you have the stock now, sell the Jan $1,500 calls for $200 as that's net $1,700 and then you can put a stop on the $2,100s at $450 to lock that in and no worries about the short calls.


  12. Phil/Bitcoin – I'll just continue to tell people what the price is going to be and whether they have any interest or not is up to them.


  13. Bitcoin/BDC – And I will continue to be skeptical…  cool

    Image result for bitcoin price chart

    Image result for bitcoin price chart

    Maybe this time will be different…


  14. Phil – fair enough!


  15. Phil,  your thoughts on TEVA?  Announcing earnings this week.  Feels like it may be another situation like F.  Too cheap to ignore as the price has dipped close to $20.  


  16. Phil thanks good idea to sell the Jan 19 call on AMZN


  17. Speaking of AMZN:

    Gravity sucks!


  18. TSLA flying again!


  19. This says it all:

    Vast differences across Europe in public attitudes toward Muslims

    Jews only do a little better:

    Western Europeans more likely than Central and Eastern Europeans to say they would accept Jews, Muslims into their family

    TEVA/Learner – When we liked them before, we thought the positives in their pipeline and the changes in health policy and regulation outweighed the negatives.  I'm not sure if that's still the case so I wouldn't knee-jerk buy in just because they are back at $20.  Copaxone is a huge drug that they are losing an exclusive on – it will keep pressure on them for ages.  Also, there's general pressure on drug pricing that will (hopefully for the greater good) squeeze their margins.  

    $20 on TEVA is $20Bn and their best year this decade they made $3Bn but last year they lost $16Bn and this year they are up $1Bn in Q1 and Q2 but I think there will be another major write-down to close this year as well.  I'm not saying I don't like them, just that they are risky until earnings stabilize. 

    AMZN/Yodi – I wouldn't sell any now, they are low in the channel and might bounce back.  Look at TLSA:


  20. Thank Phil only good if you want to sell puts!!!


  21. Some more stuff on IBM – good plan but execution will be key:

    https://techcrunch.com/2018/10/29/ibm-is-betting-the-farm-on-red-hat-and-it-better-not-mess-up/

    The company has the pieces in place now and a decent amount of marketshare, but Red Hat gives it a much more solid hybrid cloud story to tell. They can potentially bridge that hosted private cloud business with their own public cloud (and presumably even those of their competitors) and use Red Hat as a cloud native and open source springboard, giving their sales teams a solid story to tell.

    IBM already has a lot of enterprise credibility on its own, of course. It sells on top of many of the same open source tools as Red Hat, but it hasn’t been getting the sales and revenue momentum that Red Hat has enjoyed. If you combine the enormous IBM sales engine and their services business with that of Red Hat, you have the potential to crank this into a huge business.[...]

    IBM has to use that time wisely and well to make sure when they pull the trigger, these two companies blend as smoothly as possible across technology and culture. It’s never easy to make these mega deals work with so much money and pressure involved, but it is imperative that Big Blue not screw this up. This could very well represent its last best chance to right the ship once and for all.


  22. SPWR getting into the put selling zone again!


  23. Oh no, failing again!  

    What a reverse on /NQ….

    IBM/StJ – They are long-range planners – it's out of favor but I think they are making good choices.  IBM says to their sales people "how can we help you" and they say "if we could get in with Red Hat, that would be huge" and they ran the numbers and decided it would be best to buy, rather than just partner.  Hopefully $120 holds and we can build from there – again…

    Meanwhile, let's make that move in the LTP from above:

    we'll rescue $13 from the 15 2020 $120 calls ($19,500) and pick up 25 of the 2021 $110 ($20)/$140 ($7) bull call spreads ($32,500) so we'll spend $13,000 more but now we have 25 spreads that are $10 in the money so $25,000 and pays up to $75,000 against our net $34,000 total investment if all goes well and, of course, we'll make some short call sales along the way


  24. IBM- a while back I told a friend I would like to get back in IBM in the 120's and he said Oh, you'll never see that price again. 

    Well, here we are and I am now not sure I want to jump in. Need some tome to evaluate the Redhat deal. First blush looks like a heckofa premium. Going to let the dust settle. 


  25. And, by the way, I have to think IBM's decision came from the fact that, if they partnered with RHT, RHT would double or more and then they'd be way more expensive to buy and there would also be the risk of them partnering with someone else and, if they got much bigger – it could turn into a regulatory issue and MSFT and GOOGL and AMZN would scream bloody murder.  At $3Bn in sales, it doesn't raise any eyebrows – plus Republicans are in charge – best time to buy out competitors…  


  26. Talk about meaningless:

    Date Open High Low Close* Adj Close** Volume
    Oct 29, 2018 268.80 270.25 265.33 266.80 266.80 58,891,600
    Oct 26, 2018 265.92 271.00 262.29 265.33 265.33 201,498,400
    Oct 25, 2018 267.38 271.81 266.23 270.08 270.08 138,061,500
    Oct 24, 2018 273.33 273.76 264.70 265.32 265.32 177,806,700
    Oct 23, 2018 270.95 274.87 268.61 273.61 273.61 146,352,700
    Oct 22, 2018 277.00 277.36 274.41 275.01 275.01 82,415,800

  27. LB / IMAX on a nice uptrend…


  28. Adding some /SI long – maybe we'll get a bump from the 200dma.









  29. Trump says media is ‘Enemy’ after shooting, bomb plot



  30. anybody follow USAC?  Opinion Phil??


  31. IBM- while I am pondering this new development, I'll just do a covered call play. Buy the stock; sell Dec 120 call for about $5; collect $1.57 dividend in Nov. Call away return is about 4.5% in less than 2 months.


  32. it always makes me wonder if an insider simply couldn't help themselves…




  33. im a canuck so i dont know how things work in usa but after watching moores footage of ceasar sayoc i wonder if he was ever one of trumps paid for supporters.


  34. USAC /Willsons – Usually ice and boring but they just bought CDM so they'll have to digest that before getting back on track.  Showed losses last two Qs ($23M and $9M) and it's not like profits were ever very exciting so not something I'd rush to pay $1.5Bn for at $15.

    IBM/Pstas – The April $120 ($8)/$130 ($4) bull call spread is tempting at $4.

    RHT/BDC – Certainly there were rumors, that's why IBM was tanking.  

    Sayoc/Tommy – Who knows but he's certainly one of hundreds of equally crazies at the rallies.  Who know how many more will be radicalizes through continued brain-washing if the US looks the other ways and allows these mad dictators to stay in power?  cheeky

    Image result for how people are radicalized

    Image result for how people are radicalized

    Image result for how people are radicalized

    Related image


  35. tommyt – I thought his shctick was so over the top it had to be a Colbert act. His prison will be very real though.

    Next one year of investing: buy puts (or sell calls) on any run-ups. AMZN since Oct 1, yowser!


  36. Love that Foxconn article Phil! Looks like Walker is a great negotiator like our POTUS:

    https://www.theverge.com/2018/10/29/18027032/foxconn-wisconsin-plant-jobs-deal-subsidy-governor-scott-walker

    The size of the subsidy was stunning. It was far and away the largest in Wisconsin history and the largest government handout to a foreign company ever given in America. Like most states, Wisconsin had given subsidies to companies in the past, but never higher than $35,000 per job. Foxconn’s subsidy was $230,000 per job.

    It will take until 2043 to recoup that money in the best case scenario! It's like our $1T deficit to add $500B to the economy.


  37. Getting uglier as 24,500 fails on /YM/NQ hits the 2.5% rule at 6,725 but finishing lower than 2% at about 6,750 is a very bad sign as it's more likely we're consolidating for a move lower.  /RTY still lagging at 1,483.

    Wisconsin/StJ – What idiots!  

    Foxconn/Tangled – That's some crazy stuff.  I wonder what kind of bribes are behind the scenes.  May as well arrest Walker now and save time investigating after.  I'd like to invest $10M in building a business and get $3M from the state – where do I sign?  "Between 3,000 and 13,000 jobs" so let's say 10,000 jobs for $3Bn is $300,000 per job – doesn't seem very efficient to me!  The state is paying Foxconn about $20,000 per job per year vs an average of $2,500 in other state programs.   And don't forget what a Foxconn job looks like:

    Image result for foxconn workers

    In China they get $400/month ($2.50/hr).  Wisconsin's minimum wage is $7.25 – I very much doubt they'll be paying much more than that as it's already triple their normal labor cost but, of course, it's only $15,000 a year so, essentially, it's free labor – courtesy of Wisconsin!  No wonder they had an incentive to move the plant here – it's going to be net cheaper labor than China!  

    So REALLY, no one else could figure this out at the time?


  38. As I have been saying, we are not done going down! VIX is now over 26. Maybe some people are worried after all. We are not that far removed from panic – but not on this board.


  39. What is our current DXD hedge? TIA


  40. Phil can’t see any news on PYX is it just speculation run up and speculation come down. Any play here now that it’s back down or are we in falling knife territory 


  41. FB has hit my 140 price target before it even got to earnings!


  42. Phil any thoughts on MET before earnings?


  43. wow got out of FB puts at almost exactly the right time. That's a nice change from my usual M.O. … :)


  44. PYX coulter – I did try and give an assessment of PYX/Alliance One – here  – long story short, no credible reason for the run up, and when the smoke and mirrors clear it may well come back down. But I believe Phil's strategy (before he closed the Top Trade) was to sell calls on PYX on a regular basis).


  45. BA down almost 8% on renewed tariff fears.  $27 x 8.5 is 229.5 Dow points so 1/2 the Dow's loss is BA so things aren't as awful as they seem though NQ now down 3.2% so it's not like I'm calling for longs!

    VIX is angry again:

    DXD/Soma – In the STP, we have:

    Short Call 2019 18-JAN 34.00 CALL [DXD @ $33.30 $0.56] -100 8/28/2018 (81) $-9,500 $0.95 $1.40 $-0.09     $2.35 - $-14,000 -147.4% $-23,500
    Short Call 2018 16-NOV 30.00 CALL [DXD @ $33.30 $0.56] -70 8/28/2018 (18) $-8,400 $1.20 $2.35     $3.55 $0.35 $-16,450 -195.8% $-24,850
    Long Call 2019 18-APR 27.00 CALL [DXD @ $33.30 $0.56] 100 9/21/2018 (171) $27,500 $2.75 $4.25     $7.00 - $42,500 154.5% $70,000

    As we discussed earlier, we'll have to roll the short $30s and, if it keeps going up, we'll also add to the longs but it's a net $70,000 spread at $34 and, at $34, we'd owe $28,000 back to the Nov callers so still $42,000 and the current net of the spread is just $21,650 so, even without adjusting, we still have $20,000 more downside protection from this one.  

    PYX/Coulter – We had this conversation already:

    Submitted on 2018/10/19 at 2:54 pm

    • PYX – Silly stock, no logic to it, let's just get out with a small profit.  It's too crazy to sell calls against

    Submitted on 2018/10/19 at 4:04 pm

    PYX/Coulter – It's fun to play with if you want to actively work it but that's really not what the LTP is for.  Could just as easily have gone $20 against us for the same no reason.

    It's just too stupid to play.  We flipped to MJ because at least they can't go BK (it's an ETF) but I see so many poorly run pot companies that have no idea what they are doing and having money thrown at them just because they're in the sector — I have little appetite for buying any of the stocks that go public.  

    PSW Investments bought 27.5% of New Age for $1.25M and they'll get to claw back to 16.5% IF we recover 100% of our money in 3 years (through distributions) and New Age will do maybe $25M next year with about $3M in profits and hopefully double that in 2020 but, if it were a public company with those numbers – it would already be better financially than most of these $1Bn market cap companies.

    It's a joke – you have to realize it's a joke.  PYX is a rebranded tobacco company that's made about $30M over the past 4 years TOTAL!   They are based in North Carolina and can't grow or sell pot there.  All they've actually done is rebrand themselves as a pot company (and hired JWT to promote them as such) to jack up their stock price.  

    I do like them better than most pot plays because, at $22, they are only $220M in market cap and they do have $1.8Bn in tobacco sales so, if pot is legalized in NC or if they use their expertise in crop growing elsewhere – I think they have a leg up and that's what the $1.8Bn in sales means – a lot of people (3,450 employees) who know stuff about growing crops who can be sent wherever the opportunities are.  

    Still, I don't like the promotional pumping management engages in and that kind of attitude often leads to dangerous risk-taking and, if that fails – book-cooking or fraud (see TSLA) – so I decided to get out for the LTP but we still have our shares through MJ – just in case it ever works out.

    FB/BDC – They'd better not blow it or the Nasdaq is toast! 

    MET/Coulter – I'm not sure what kind of property exposure they have via hurricanes so no way to know how earnings go but rising rates are generally good for insurance companies, who have to invest their massive reserves in conservative instruments like bonds.  Half of MET's business is overseas so they are well-diversified and, AFTER earnings, I may want to add them but not before.

    PYX/Winston – Right, I only wanted it to be able to sell calls but, once it dropped so fast, that became too dangerous so I just closed it out.


  46. Well, that's a hell of a way to start the week.  /NQ finishing down 2.6% (6,715) is BAD.  

    Still, it's only Monday so it doesn't count…

    Speaking of not counting – I'll be on a boat next week, not my usual Vegas vaca.  I'm going to try to have at least two family days – not sure which ones though.  For sure no webinar though.   Tuesday is election day, of course, but the market is still open and 11/12 is Veterans day, also the markets are not closed.  

    We do finally get a real day off on 11/22 (Thanksgiving) and a half day that Friday which is ridiculous and no one shows up.   

    Christmas day is Tuesday this year and, officially, we have a half day on Christmas eve but that's another 2 days you can skip – as well as the next week when we have New Year's eve on Monday and New Year's day is officially a day off.   

    I think I'm going to go somewhere for that week – maybe Europe.  Two short weeks in a row is a good time to take a long trip…


  47. Wow!

    Very big one-day moves.  Both very tempting…


  48. GE before the bell Tuesday! 


  49. Trump is sending 5,200 troops to the Mexican boarder to stop the caravan.  I guess he plans on declaring some massive military victory if he stops them (from legally applying for asylum).  

    Related image

    VIX turning back down – maybe an up day ahead?


  50. Atitlan--I hope that POS does better than the other FU stocks have done after earnings!!!!


  51. Fingers crossed Jabo – they've got to come buy the pigs at some point!


  52.  

    WASHINGTON — President Trump is considering a major speech on Tuesday to announce a broad crackdown on the southern border, administration officials said Friday, making a significant play to energize his anti-immigrant base one week before midterm congressional elections where Republican control of Congress is at stake.

    Mr. Trump is expected to use the remarks to outline his plans for the deployment of hundreds of Army troops and to fortify the border, including executive actions he is considering to deny entry to Central American migrants and asylum seekers.

    A bid to freeze or cut financial aid to Central American countries whose citizens are making their way north toward the United States is also under discussion, with proposals coming from both the National Security Council and the Office of Management and Budget, according to two Trump administration officials, who said a final decision would be reached by Tuesday.

    Even as the president’s advisers met on Friday to nail down the details of the multipronged border operation, human rights groups raised concerns about Mr. Trump’s plans, calling them politically motivated and potentially in violation of United States and international law. And Democrats condemned what they called a blatant political ploy to distract voters before Election Day.

    “The G.O.P. is desperate to change the conversation from their assault on Americans’ health care to the baseless fear of some families 1,000 miles away from the border,” Representative Nancy Pelosi of California, the House Democratic leader, said in a statement. “Despite Republicans’ fearmongering, this group of families may not even make it to the U.S. border, and those migrating for economic reasons will not qualify for asylum.”

    She blamed the president, who often lays responsibility for the country’s immigration problems at the feet of Democrats, for the failure to overhaul the system, saying he had “sabotaged multiple opportunities to reach a bipartisan consensus on immigration, including on border security.”

    Mr. Trump is weighing executive actions to essentially make it impossible for a large group of Central American migrants trekking north through Mexico to be able to seek refuge in the United States.

    The plan, according to people familiar with it who spoke on the condition of anonymity, would include a change in the rules governing asylum eligibility along with a presidential proclamation characterizing the migrant caravan as a national emergency and barring its participants from entering the country.

    It is not clear that such a presidential directive would be legal either under United States immigration law or international law, both of which contain obligations to evaluate the individual claims of people who present themselves and ask for asylum, claiming a credible fear of returning to their countries of origin.

    In addition, Mr. Trump would be hard-pressed to demonstrate that the caravan constitutes a national emergency. The group, which is roughly 1,000 miles south of the border, is currently estimated as having around 6,000 people and as consisting largely of women and children. Given the complex legal issues involved, it could take months or even years for the plan to actually remove would-be immigrants from the United States.

    Under the plan, which is still under discussion and could change, the Homeland Security and Justice Departments would jointly issue new rules that would disqualify migrants who cross the border in between ports of entry from claiming asylum, according to people familiar with the discussions but who were not authorized to discuss the planning. Exceptions would be made for people facing torture at home.

    Mr. Trump would then invoke broad presidential powers to bar foreigners from entering the country for national security reasons — under the same section of immigration law that underpinned the travel ban — to issue a proclamation blocking migrants from crossing the southern border, according to the plans under discussion. It was not clear how broad the directive would be, including whether it would apply only to people from certain countries or those arriving within a certain period of time.

    Well, I'll say this for Trump, he does make me more religious because I pray that there's a special place in Hell for him and his GOP cronies!  


  53. New age clawback – same principle applies, but isnt the clawback if they return 75% of the investment in 5 years?




  54. Trump pours gasoline on the fire


  55. Phil – thanks for PYX info, I saw the previous post (but that was $15 higher)  just didn't know if you thought it was worth a poke at the $22 level



  56. The Mystery of the New Boeing Jet That Plunged Into the Sea, Killing 189




  57. Stocks tumble again on report US plans more tariffs




  58. Good morning! 

    More of the same – futures up a bit but they aren't fooling as many people these days.  Dip buyers have been burned too many times to stay stupid. 

    Dollar rising so that's not helping things.

    New Age/CRS – We got better terms when we upped our buy from $1M to $1.25M.  The additional money allows for another processing machine which should increase cashflow (and ability to pay back).  

    PYX/Coulter – As a gamble, it doesn't suck but not for a portfolio I'm putting my name on!  

    Definitive/Batman – I doubt they know everything, these guys have been playing this game for years – I'll bet there's all sorts of things going on people haven't figured out yet.