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Tariffic Tuesday, Part 12 – Trump Ramps Up Tariff Talk Ahead of G20 Meeting

Image result for trump robin hoodDoes he do it on purpose?  

As much as the President likes to complain about the market not performing well, more often than not he's the primary cause of poor performance.  Yesterday, for example, we were having a lovely bounce (albeit on very low volume) but then Trump suddenly decides to say he's moving ahead and boosting tariffs on $200Bn worth of Chinese goods from the current 10% to 25% – which is up 150% from where they are and will sock American Consumers with an additional $30Bn in tax, crippling disposable income and boosting inflation.  But it's $30Bn more in tax breaks he can give to his friends so – winning!  

In an interview with The Wall Street Journal, Mr. Trump suggested that if negotiations don’t produce a favorable outcome for the U.S., he would also put tariffs on the rest of Chinese imports that are currently not subject to duties.

"The rest" is another $267Bn with of goods and 25% of that would be yet another $66Bn picked from the pockets of American Shoppers.  So we're talking about $96Bn worth of additional taxes aimed at the people who can afford it the least and the chances of Trump not doing that but instead making a deal with Xi this weekend that widens his already out-of-control budget deficit by $96Bn are slim to none – just as I've warned about from the start.  These tariffs have nothing to do with China and everything to do with making middle Americans (the suckers who voted for him) pay for his tax cuts while wrapping it in a flag of patriotic protectionism that hasn't bought a single job back to our shores in two years.

Trump has done NOTHING for jobs and, in fact, Trump's first 22 months in office created just 4.1M jobs while Obama's last 22 months in office created 4.8M jobs – Trump inherited a triple and turned it into a double and, at this pace, it will dribble out into a weak single. 

In fact, for the Red States he supposedly cares about – it's already a ground out as he's LOST 2% of the Jobs in 2018 while the Blue States with their higher minimum wages and crazy tax policies and Obamacare programs keep growing.

Now that GM has announced 14,0000 job cuts right in the heart of Trump Country, we don't expect that chart to improve and a continued trade war with China will shut down farming and equipment sales, leading to tens of thousands of additional job losses for the idiots who voted for Trump, thinking he actually gave a damn about them.  

These aren't "accidental" losses, these are job losses cause by poor trade policies and poor economic policies and even poor environmental policies as GM is killing production of the Impala, Volt and Cruze – economy cars no longer in demand as relaxed Government mileage requirements led to a shift back towards SUVs and Trucks.  Those 3 models had 170,000 units sold in the first 3 quarters vs over 400,000 Siverado trucks, which GM makes more money on and the salespeople have more incentive to sell now that the "Big Brother Government" is no longer requiring that GM watch their fleet mileage.

Related imageSilverados are made in Silao Mexico, Oshawa Canada and Valencia Venezuela and those cities are becoming great again while Cruzes, Impalas and Volts are made in Detroit, Flint & Hamtamck Michigan and Lordstown Ohio (the name didn't save them).  Gee, who'd have thought that removing the incentives to make small cars and removing the penalties for making gas-guzzling trucks would have moved jobs from American factories making small cars to foriegn factores making large trucks?  Yep, I guess no one could have seen that coming so I guess we should blame Obama, right?

That's why I have no pity for Trump voters in those places – Trump TOLD YOU what he was going to do and now he did it and these are the real-life consequences, not the fantasy outcomes he said would happen.  One can only hope they learn a lesson that will last until November of 2020 – when we can once again vote for change – which is sadly what a lot of Trump's voters will be begging for long before then...

Meanwhile, back to trade talks (or lack thereof) – according to the WSJ:

Chinese Vice Premier Liu He, Mr. Xi’s economic envoy, traveled to Germany this week to attend a China-Europe forum instead of going to Washington to meet with U.S. negotiators. People close to the Chinese government said Mr. Liu’s trip to Germany had been planned for a while, but the timing was firmed up after Mr. Liu decided not to go to Washington for any presummit talks.

The President said tariffs could also be placed on Apple (AAPL) iPhones and laptop computers imported from China if the U.S. decides to put tariffs on additional goods – that's not helping the market much as AAPL drops back to $171, dragging the Nasdaq, Dow and S&P along with it.  In a September letter to U.S. trade authorities, the iPhone maker said tariffs would disadvantage the company compared with foreign competitors and lead to higher U.S. consumer prices.  

As you can see from the map, owning an android phone clearly makes you a Republican but being a Republican doesn't preclude you from owning an IPhone so Apple taxes will be another shock to many in Trump's base as they are just too darned popular to be contained by political boundaries.  

Speaking of political boundaries (and World War III)Ukrainian President Petro Poroshenko said the country’s parliament had approved his declaration of martial law for 30 days starting Wednesday, for a number of provinces most vulnerable to Russian aggression.  Russia, who thinks they can now do whatever they want under the watch of a Putin Puppet President, seized 3 Ukranian Naval Ships and US Ambassador, Nikki Haley came out swinging on the President's behalf saying Russia's actions "Will further increase tensions with Ukraine."  Wow, that's a strong response from the Trump Administration almost as strong as when Trump asked Putin if he meddled in the US elections and Putin said "no" and Trump made him do a pinky swear….

“We don’t like what’s happening (a clear act of war by Russia against the Ukraine) and hopefully it will get straightened out,” said Mr. Trump, who had to pause while Putin had a drink of water but then added that the U.S. is consulting with allies in Europe about the incident.

NATO Secretary General Jens Stoltenberg said the events marked a serious escalation of tensions in the region. “Russia has to understand that its actions have consequences,” said Mr. Stoltenberg, who called on Russia to release the Ukrainian ships and naval personnel.  This morning, a court in Crimea has ordered one of the 24 Ukrainian sailors captured by Russia at the weekend to be detained for two months on charges of illegally crossing Russian borders.

Ukrainian troops have been fighting Russian-backed separatists in eastern Ukraine since 2014 but the hostilities have largely subsided since a truce was signed in 2015 but Russia build a bridge across the strait in May – the kind you might send troops across if you were looking to invade the rest of the Ukraine through Crimea…

Market-wise, we're still watching the same bounce lines we were watching yesterday.  My comment to our Members in the morning chat was:

Still the same 10% lines and index lines we'll be watching as last week's slide below them was just a spike on the daily chart now that it's been erased, so we're at:

  • Dow 24,300 with a weak bounce at 24,800 and a strong bounce at 25,300
  • S&P 2,640 with a weak bounce at 2,710 and a strong bounce at 2,780
  • Nasdaq 6,870 with a weak bounce at 7,080 and a strong bounce at 7,230
  • Russell 1,485 with a weak bounce at 1,530 and a strong bounce at 1,575
  • NYSE 11,880 with a weak bounce at 12,150 and a strong bounce at 12,400

Another nice thing about the simple bounce line chart is it's easy to see where the inflection points are and this morning it's the NYSE, which is just over 12,150 at 12,195 at the moment.  Then we'd look to see if  the Nasdaq confirms a comeback but, at 6,651 after already being up 120 (1.8%) it's way beyond unlikely that we'll get another 200 points so we should be very skeptical of all approaches to the weak bounce lines while the Nas is still more than 10% down.  

So, if anything, the NYSE failing 12,150 would confirm that the low-volume pop isn't likely to stick and then we can look to short the laggard on the way back down.  How's that for a morning plan?

 


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  1. Phil Thanks on NVDA "the one and only " reading through the comments.!!!! Nice to hear from you guys.



  2. Like many of Trump's campaign statements, this one did not age particularly well. And yet those people will still vote for him!  Trump will blame GM (or has already blamed them, I can't keep track.)

    "If I'm elected, you won't lose one plant, you'll have plants coming into this country, you're going to have jobs again, you won't lose one plant. I promise you. I promise you."


  3. The best ever:

    https://www.bloomberg.com/news/articles/2018-11-05/record-number-of-markets-now-in-the-red-in-worst-year-since-1901

    A whopping 89 percent of assets have handed investors losses in U.S. dollar terms, more than any previous year going back more than a century. The metric comes courtesy of Deutsche Bank AG, whose macro strategists feature it as their chart of the week.

    Thank you Mr. President! How about some tweets about the markets?


  4. Good Morning.


  5. Good morning!  

    You're welcome Yodi.  

    Big Chart – there's nothing worse than a failed W pattern…

    Dollar keeps going up, not helping.  

    Not much to do but watch and wait for the moment but NYSE 12,127 makes me glad we added the SQQQ hedge on Friday.

    • Cyber Monday sales topped $7.9B (19.7% growth Y/Y), according to Adobe Analytics, making it the single largest shopping day in U.S. history.
    • In comparison, Thanksgiving Day and Black Friday brought in $3.7B (28% growth Y/Y) and $6.2B (23.6% growth Y/Y) in revenue, respectively.
    • Sales coming from smartphones also hit an all-time high of $2B and the "Buy Online, Pickup In-Store" trend spiked 50%.
    • Previously: Retailers lead broad-based stock market rebound (Nov. 26 2018)
    • Previously: Cyber Monday expected to set a record (Nov. 26 2018)
    • S&P Corelogic Case-Shiller HPI+0.3% M/M vs. +0.2% consensus, +0.1% prior (revised).
    • +5.1% Y/Y (N.S.A) vs. +5.3% consensus, +5.5% prior (revised).
    • Federal Reserve Vice Chairman Richard H. Clarida, like his boss Jerome Powell, continues to describe U.S. economic fundamentals as "robust."
    • "Risks have become more symmetric and less skewed to the downside than when the current rate cycle began three years ago," he said in a speech in New York titled "Data Dependence and the U.S. Monetary Policy.
    • Central to the Fed's mandate are two data points that aren't directly measurable--the rate of unemployment consistent with maximum employment (u*), also called optimal unemployment rate, and the riskless real rate of interest consistent with price stability (r*), often referred to the neutral rate because it neither helps or hinders economic growth.
    • The upshot is the Fed is still on the path for "gradual policy normalization," or in Fedspeak raising interest rates closer to pre-financial crisis levels. "This process of learning about r* and u* as new data arrive supports the case for gradual policy normalization, as it will allow the Fed to accumulate more information from the data about the ultimate destination for the policy rate and the unemployment rate at a time when inflation is close to our 2% objective."
    • Similar to Powell's comments on anchored inflation expectations, Clarida says, "The median of expected inflation 5-to-10 years in the future from the University of Michigan Surveys of Consumers is within--but I believe at the lower end of--the range consistent with price stability."
    • Expected personal consumption expenditures running at "somewhat less than 2%."
    • On the labor front, there "may still be some further room for participation in the job market??especially in the prime-age group of 25-to-54-year-olds??to rise."
    • U.S. 10-year Treasury note price slips slightly, increasing the yield 1 basis point to 3.065%.
    • U.S. dollar index up 0.1% to 97.14.
    • Previously: Bond yields slip on Clarida comments (Nov. 16)
    • Previously: Big changes in store for the Fed (Nov. 15)
    • Previously: Fed Chairman Powell 'happy' with U.S. economy, credits Fed policy (Nov. 14)

    Article 50 makes its way to ECJ

    • The EU's top court today will deliberate whether the U.K. can unilaterally cancel Brexit once it is triggered, a decision some Remain campaigners think might give them an argument to reverse Brexit.
    • The timing could not be better: Dec. 11 has been set as the date for the House of Commons "meaningful vote" on Theresa May's withdrawal agreement.
    • Tensions surrounding the pact are still growing as President Trump said her plan could threatena U.K.-U.S. trade deal.
    • The Swiss government aims to clinch a deal with the EU on a new treaty governing relations in 2019, pushing back the timetable for an accord that both sides had intended to conclude this year.
    • While the bloc has been pressing Bern to ease rules that protect high Swiss wages against cross-border competition from skilled labor, Swiss unions are fighting back tooth and nail, dimming the outlook for a potential deal.
    • Previously: Swiss reject 'self-determination' initiative (Nov. 26 2018)
    • Reiterating his 2019 primary surplus goal and quashing any idea of a pensions grab, Mexico’s incoming finance minister Carlos Urzúa is seeking to calm investors after a day of what he called market "trauma," as stocks cratered to a three-year low and the peso weakened 1%.
    • The selloff came after the incoming administration organized a second informal "people's poll" at the weekend, as well as threats from President Trump to shut the southern border.
    • Previously: Peso on watch as Trump threatens to close border (Nov. 26 2018)
    • Aurora Cannabis (NYSE:ACB) has received an export request, has secured the required export permit and has now completed its first shipment of medical cannabis products to the Czech Republic, making this the 21st country in which the company operates.
    • The initial purchase order was placed by, and products will be shipped to Czech Medical Herbs s.r.o. ("CMH"), who will subsequently supply pharmacies throughout the country.
    • Shares are up 2% premarket.

    Tesla China sales plunge 70% in October

    • Tesla's (NASDAQ:TSLA) sales in China sank 70% from a year ago to 211 vehicles in October, according to the China Passenger Car Association, underscoring how the Sino-U.S. trade war is hurting the American automaker.
    • The data comes after Tesla said it was cutting the price of its Model X and Model S in China to make the cars "more affordable" and absorb more of the impact from higher tariff rates.

    Coca-Cola Credit Rating Downgrade: Why It Matters For Equity Shareholders 

    Salesforce Reports Earnings Below The Cloud Of A Potential 'Death Cross' 

    Spotify: Undervalued And With A $1-Billion Buyback Program 

    UBS catches up to big drop in Micron

    • Micron (NASDAQ:MU) has tumbled from the low $60s to the mid-$30s over the last 5-6 months, and UBS this morning gets with the times, slashing its price target to $41 from $52.
    • The team had been neutral on the stock, noting its bearish DRAM cycle thesis earlier this year is playing out, but the decline is coming faster and steeper. They think pricing could fall 12-15% in Q1 vs. its previous forecast for 10-12%.
    • Micron, says UBS, is likely about three months from a bottoming in Street estimates, which still look 20% or more too high.
    • Source: Bloomberg
    • Shares are down 2.1% premarket to $35.79.

    Ericsson expects explosive 5G growth

    • Ericsson (NASDAQ:ERIC) expects 5G subscriptions to grow by 50% in 2024 to 1.5B to cover more than 40% of the world's population.
    • Major global netowrk deployments are expected to start in 2020.
    • The Swedish multinational networking and telecommunications company sees a total of a total of 8.9B mobile subscriptions at the end of 2024, up from 5B subs at the end of this year.
    • Source: Reuters Morning Call

     

    • Google (GOOGGOOGL) just spent $1B on a large office park near its headquarters in Mountain View, California, the Bay Area’s largest real estate purchase this year.
    • In this case, Google is buying property that it's already been leasing.
    • Earlier this month, Google agreed to pay an additional $110M for 10.5 acres for a new campus in downtown San Jose, with the possibility of scooping up 11 more acres.
    • Facebook (NASDAQ:FB) CEO Mark Zuckerberg was a no-show before a committee of British lawmakers today, prompting consternation among legislators from the UK and other nations.
    • The UK committee tweeted a link to a picture of Zuckerberg's empty seat with the text "9 countries. 24 official representatives. 447 million people represented. One question: Where is Mark Zuckerberg?"
    • The panel hammered Facebook's Richard Allan, who did appear, over Zuckerberg's absence.
    • The committee head there says a memo he reviewed shows Facebook knew Russian-linked entities were using a network feature to let advertisers harvest large amounts of data as early as October 2014. Facebook has said it was unaware of such activity until after the 2016 election.
    • Allan refused to discuss particular documents which have been sealed by a California court. He did say Facebook would welcome clear laws globally around political communication, while maintaining Facebook hasn't violated existing laws nor an FTC consent decree concerning user privacy.

  6. 'Worldwide Truth Network'  Did he forget about Fox news?…. ;)


  7. Yodi / NVDA – I like them as well – They have great profit margins, and will play a key / profitable role in AI / VR  gaming automotive  Their recent growth has been driven by bitcoin, and in the Sept ( I think ) Conf call the CEO indicated that they were not projecting Crypto to come back ( I think they said revenue would be non consequential) so if you've got a target minus crypto that might make sense it may be a good play.   I never finished my analysis on the, but was looking at this stock at maybe an eps of 7.2 this year and 8 next.  


  8. Batman NVDA I put up an offer for a small play as I have set out. So we see what fills. I just do not put all my eggs in one basquet.


  9. https://stratechery.com/2018/antitrust-the-app-store-and-apple/

    This was concerning for my large Apple position.  Will Apple have to give up their App Store revenue sometime in the future due to antitrust?  That would be devastating for our position.



  10. The Energy 202 from The Washington Post






  11. There Is No Grand Bargain With China



  12. US home prices rise more slowly amid weaker sales





  13. Truth/1020 – Fox News is not right enough for Trump.  These guys want 24/7 propaganda and not even the pretense of "balance".  Sadly, people will watch it as they love having their World view regurgitated to them…

    NVDA/Batman – I don't know where you're getting 7.2 p/e as $153 is $93.5Bn and they are, at best, projecting $4.5Bn in profits with 2018 in the can for them (Q4 is Q119) so not likely to be any upside surprises.  

    AAPL/Palotay – Well, they wouldn't give it up, they'd split it out into AAPL Retail if they had to but it would make the remaining company iPhone-heavy again.

    • November Consumer Confidence135.7 vs. 136.5 consensus; 137.9 prior in October.
    • Present situation Index 172.7 vs. 171.9 prior
    • Expectations Index 111.0 vs. 115.1 prior.
    • Spirit Airline (NASDAQ:SAVErallies 18% after the company issued a positive tone on industry-wide pricing, which could add to some of the benefits the company is seeing from nonticket pricing initiatives. Shares of Spirit reached a multi-year high of $61.98 earlier in the day.
    • Spirit's pricing reads tend to be noticed across the sector. Delta Air Lines (DAL +2.8%), JetBlue (JBLU +1.8%), Alaska Air (ALK +1.2%) and Southwest Airlines (LUV +1.1%) are all gainers today.
    • JPMorgan says Southwest Airlines (LUV +1%) has lifted fares on about 21K different domestic flights.
    • The early read on the pricing bump from industry insiders is that it is being followed across the U.S. fare structure to the tune of about $2 to $5 on one-way fares.
    • Also in the airline mix today is the call from Lufthansa's CEO for consolidation in Europe and a bright outlook from Spirit Airlines (SAVE +16.2%).
    • Gainers in the sector include Azul (AZUL +1.4%), Delta Air Lines (DAL +2.9%), United Continental (UAL +1.3%), JetBlue (JBLU +1.5%), Alaska Air (ALK +1%), Skywest (SKYW+0.7%), Allegiant Travel (ALGT +1%) and American Airlines Group (AAL +0.6%).
    • Related ETF: JETS.
    • Nasdaq (NDAQis forging ahead with its plan to list bitcoin futures, Bloomberg reports, citing two people familiar with the matter.
    • The exchange operator is aiming to allow trading in Q1 2019, according to one of the people; meanwhile, Nasdaq is working to satisfy concerns of the Commodity Futures Trading Commission before the contracts start trading.
    • The move signals that Nasdaq expects investors won't abandon cryptocurrencies even though they've plunged during the past year.
    • Separately, VanEck has been trying to get SEC approval for a crypto-based ETF, Bloomberg reports.
    • Bank of America (BAC +0.9%) Merrill Lynch leads U.S. IPO market share for the first time since 2013 and by the widest margin of any leader in at least 10 years, according to Bloomberg league tables.
    • Overall, IPO listings have risen by 7.4% on average from their offering prices, while the S&P 500 YTD is down 0.3%.
    • Listings including BofAML on the syndicate comprised over half of the $62B total raised through IPOs in 2018, with more than $4.75B of 2018 volume directly credited to BofA, resulting in an 11.1% market share.
    • Goldman Sachs (GS -0.7%) takes the number two spot with 8.64%.
    • IPO activity appears to be slowing for the rest of 2018. Next year, Uber and Lyft may hit the market.
    • Source: Bloomberg First Word.
    • Previously: Tencent Music weighs IPO in early December (Nov. 23)
    • Teva Pharmaceutical Industries (TEVA -1.5%announces the limited availability of its generic EpiPen (epinephrine injection) in the U.S.
    • The wholesale price of the emergency allergic reaction med is $300.
    • The company says it will increase supply next year.
    • Previously: FDA approves Teva's generic EpiPen; shares +5.7% (Aug. 16)
    • General Motors (GM -1.1%), Ford (F -0.9%) and Fiat Chrysler Automobiles (FCAU -1.9%) all trade a bit lower as global growth uncertainty and tariff headaches continue to dominate the discussion. Ahead of the G-20 meeting, there are reports out indicating that President Trump is considering automobile tariffs as early as next week. Whether or not the tariff threat ends up being a negotiating tactic, automobile companies are already suffering on their bottom lines from the higher costs of steel and aluminum that can't be passed on in full to consumers.
    • Across the pond the declines are worse, Daimler (OTCPK:DDAIF) is down 2.2% in Frankfurt and Volkswagen (OTCPK:VWAGY) is 2.5% lower. BMW (OTCPK:BMWYY) is also in harm's way, but only trades 1.3% lower in overseas afternoon action.
    • Tesla (TSLA -2%) and Tata Motors (TTM -1.7%) are also notably lower on the day.
    • Self-driving unit Waymo (GOOG +0.4%GOOGL +0.5%) has put so-called "safety drivers" back behind the wheel of its autonomous vehicles in the past month out of concerns over vehicle safety, The Information reports.
    • That follows a year where such supervisors sat in the passenger or back seat of the vehicles.
    • And the move comes ahead of a very tight year-end deadline that Waymo set for itself to launch a fully automated public taxi service.
    • The report notes that Waymo's only testing its most advanced vehicle prototypes — the ones most likely to be the basis for automated taxis — in about 60 square miles (some 5% of the Phoenix metro area).

  14. In today’s market I set up the following Mc Muffin trades
    AAPL Dec 28 Vertical put 160/155 sold for .75
    FB Jan 19 Vertical put 125/120 sold for .95
    AMZN Dec 21 Vertical 1550/1545 sold for 1.88
    This is with limited risk and relative low margin


  15. By the way, I put up the Portfolio Review, which is still on the Main Page or under the Phil Tab prior to moving to the Portfolio Review section.  

    Fun trades Yodi.  I haven't been inclined to call much lately as there's really no way to tell if we're going to go up or down 10% from here but I think down is still a bit more likely – especially if there's no trade progress over the weekend.  

    AAPL back to $174 – that's a relief and a good sign of strength.


  16. Steel stocks have been demolished.

    AKS is too cheap, IMHO.


  17. oil???


  18. Jabo/Oil – it seems that we are back into the $45-$55 channel we used to range. So at $50 it is hard to play


  19. jabobeast saudis pumped alot and looks like the shorts are solidly in control

     

    unfortunately


  20. Phil – any adjustments to the UGA call spread that we opened awhile back? Long Jan 28's. Sold short Jan 31's?


  21. Hello Phil and the gang.  I hope everyone's Thanksgiving was good.   Phil, do you have any thoughts on the upcoming "death cross" patterns that it looks like most major indexes will be having in the near future.  Any history or historical data around the "death cross" you can share with us?  I feel the market is setting up for another leg down.  TIA.


  22. Jabo/Oil – FYI OPEC meeting Dec 6 (Thu week)


  23. Well, everything is curling over again – even oil.  Dollar 97.40 not helping.

    /RB down 2.5% at $1.41 – we'll see if that gets at least a weak bounce (half a centish).

    GE $7.43!  

    UGA/Soma – Yeah, that's sucking.  We paid $1.20 and the $28 calls are down to 0.65 in the STP so well below the net of the spread.  I thought /RB would go back to $1.50 so we could roll but if they don't at least weak bounce (and hold it) today, I think we may have to capitulate.  

    Long Call 2019 18-JAN 28.00 CALL [UGA @ $24.56 $-0.30] 30 11/7/2018 (52) $6,000 $2.00 $-1.35 $2.00     $0.65 $-0.10 $-4,050 -67.5% $1,950
    Short Call 2019 18-JAN 31.00 CALL [UGA @ $24.56 $-0.30] -30 11/7/2018 (52) $-2,400 $0.80 $-0.55     $0.25 - $1,650 68.8% $-750

    Gasoline and oil are not the same thing, I do think /RB will come back – certainly by July and the UGA July $24 ($3)/27 ($1.85) bull call spread is $1.15 so we'd have to add 0.50, putting us in the new $3 spread for net $1.70 – not terribly terrible for a salvage play if we have to.

    Death Cross/Rob – Well they are very bad technical signals and we already have it on the RUT and the Nas is unavoidable and they are still trading up 22.5% while the RUT is pretty flat to the Must Hold line.  NYSE already death crossed S&P can't avoid it either so all bad long-term signals which is why we added 100 SQQQ spreads on Friday to the STP!  If Trump can pull a trade deal out of his ass – that would probably prevent major damage but if we ratchet up trade war with China at the same time as the charts flash bear market signs – then we can only assume that Trump is also looking to undo Obama's market rally – as well as everything else he accomplished…


  24. Thank you!


  25. Death Cross / Phil – As we discussed before, statistically not hugely significant. The context in which they appear is more interesting. For example, we are in the middle of a trade war, deficits are out of control, GDP is probably slowing down (US and World) and we have no fiscal stimulus slack! And the guys in charge would love nothing more than to cut domestic spending to curb the deficits. And let's not forget rising rates. So like I said yesterday, nothing really positive for the markets.

    The best scenario right now would be to find a compromise on trade and that would mean admitting defeat in some cases so not gonna happen, raising taxes on the top 10% (and we know that won't happen either) or redirecting some of the cuts to the middle class (not gonna happen) and Trump persuading the Fed to lower rates (not politically very viable). Pick your "not gonna happen" scenario!


  26. Just an FYI "oshawa" not becoming great again because the GM announced its closing it's Oshawa plant as well!


  27. Trump going after Bara about plant closings and suggesting he’ll pull subsidies to GM, wonder how that will help them create jobs?? 


  28. GM / Jeffdoc -The same way pulling federal help from California helps it fight forest fire!


  29. FYI/crs, another FYI, Valencia Venezuela not becoming great again because GM hasn't produced vehicles there since 2015 because of punitive currency controls and punitive economic polices that killed the supply chain, and because the government took the plant from GM early last year  

     https://www.washingtonpost.com/world/venezuela-seizes-a-gm-plant-amid-antigovernment-protests/2017/04/20/e58a229c-25c7-11e7-928e-3624539060e8_story.html?utm_term=.697d11e81c66

    So I guess that makes Mexico the grand prize winner


  30. The problem is that these GOP guys gave these big tax cuts to businesses with the "promise" that it would lead to job creation. They knew the entire time that it was complete BS, the money would be used for buybacks and special dividends. It was OK until it hurt them politically like with GM! 


  31. Phil/pzza

    Good day!

    Do you have pzza? I thought I may have read a few weeks ago that you had some kind of position in it.

    Maybe I am mistaken…what do you think of the news that their buyer is out?


  32. Oshawa, Velencia/Crs, Mike - Well then just Mexico is great again!  I guess they will need to build a wall, to keep those ex-Trump voters from coming down to steal the good manufacturing jobs…

    GM/Jeff – Nice way to act in a supposed democracy that supports Capitalism.  Most dictators at least bother to pretend they aren't self-interested thugs…

    • President Trump says the administration is looking at cutting all subsidies for General Motors (GM -2.4%), including for electric cars.
    • It's unclear how a company-specific EV incentive ban would work, but shares of Tesla (TSLA-0.2%) have tracked slightly higher off the development. GM is at its low point of the session.
    • White House Economic Adviser Larry Kudlow says President Trump is very cross with General Motors (GM -1.5%) CEO Mary Barra and that the "story is not over" in reference to the company's plans to eliminate jobs and shut down plants in the U.S.
    • GM has stated that it's making the cuts as part of a global strategy to produce most of its cars from just five vehicle architectures amid an electrification push and in response to low demand for passenger cars made at the plants in question. While Barra and the other top brass at GM have pointed out in the past the company's +$1B in extra costs from steel and aluminum tariffs, they also have avoided any direct war of words with the Trump administration.
    • Shares of GM are up 4.4% for the week.
    • Previously: Meet the new GM (Nov. 26)
    • Previously: Trump weighs in on GM's plans (Nov. 26)
    • Stocks are still in the red, but pare some earlier losses, as news breaks that the White House and China are holding trade talks at "all levels" ahead of Trump and Xi meeting.

    • Goldman Sachs sees the plant closings by General Motors as a potentially positive development for Tesla (TSLA -0.6%).
    • "While we take no view on the likelihood of Tesla making a plant purchase, we believe the GM announcement was a positive for (Tesla) shares as it opens up another avenue (outside of constructing new capacity) to potentially purchase a plant for a lower amount," advises the GS analyst team.
    • Tesla is seen needing extra capacity in the future when the company is ready to start producing the Model Y crossover.
    • A spokesperson for Tesla (TSLA -1.2%tells Fortune a report indicating that the automaker only sold 211 cars in China during October is "wildly inaccurate."
    • The number quoted by an official with the China Passenger Car Association is off by a "significant" margin, according to the Tesla response.

    • Steel names are broadly lower following news of Steel Dynamics' (STLD -8.2%) plans to build a new $1.7B-$1.8B electric arc furnace carbon sheet steel mill in the U.S.: X -8.2%AKS -3.8%MT -2.6%NUE -1.8%.
    • KeyBanc analyst Philip Gibbs expected shares of U.S. carbon sheet-based companies to post losses today on the potential for further U.S. supply growth, and the prospect of more U.S. steel supply likely will weigh on steel prices.
    • Also, "STLD investors may be a bit disappointed via potential for less bandwidth to pursue full-out share buyback momentum ($729M left at September's end)," Gibbs says.
    • Longbow Research lowers its 2019 spot price outlook for hot rolled coil steel by $10 to $15/ton and now calls for 2019 prices of $790-$795/ton, a ~5% drop from 2018 average prices.
    • But Longbow maintains its Buy rating and $40 price target for U.S. Steel, believing the shares are significantly undervalued even after adjusting for potential market headwinds.
    • Casinos in Nevada reported that gaming win revenue increased 7.5% Y/Y in October to $1.063B.
    • Revenue on the Las Vegas Strip jumped 12.2% to $593.4M during the month vs. last year's total that was impacted by the shooting at the Mandalay Bay. Downtown LV casino revenue was up 0.3% Y/Y to $63.76M. Boulder Strip revenue fell 0.6% Y/Y to $78.32M.
    • Total slots revenue rose 5.8% to $693.5M during the month off a win percentage of 7.2%. Slots are up 3.5% for the calendar year, with all major markets in positive territory.
    • Games and tables revenue was up 10.8% to $369.3M off a win percentage of 13.2%. Baccarat win was down 13.0% Y/Y.
    • Sports books in the state won $29.5M from bettors in October, with football accounting for over $11M of the tally.
    • Nevada Gaming Control Board full report (.pdf)

    • Papa John's International (NASDAQ:PZZA) is down 10.5% off a Wall Street Journal reportindicating that Trian Management is no longer showing an interest in the pizza chain.
    • The company has been shopping itself since August, but has struggled due to the damage to the brand from ex-CEO John Schnatter and the resulting feuding.
    • Next-day natural gas prices at the Waha hub in the Permian Basin sank nearly 80% to their lowest on record because of limits on the amount of gas that can move out of the region by pipeline, Reuters reports.
    • Prices at the Waha hub fell to an average of $0.25/MMBtu, compared with an average of $2.16/MMBtu YTD, $2.71 in 2017 and a 2013-17 average of $3.11.
    • The cause of the price collapse likely is driven by "continued associated gas production growth poured into a region that won’t see new greenfield pipeline capacity for at least 10 months," RBN Energy analysts say, noting "we are about to enter a period of complete exhaustion of Permian gas takeaway."
    • RBN says the increase in associated gas production is due in part to the expansion of Plains All American Pipeline’s (PAAPAGP) Sunrise oil pipeline, which enables oil trapped in the Permian to flow to the Gulf Coast.
    • Several energy companies are building or developing new pipelines to enable more gas to flow out of the Permian region, including Oneok’s WesTex (OKE -0.1%) and Roadrunner projects, and Kinder Morgan’s (KMI -0.9%) Gulf Coast Express and Permian Highway projects, but they will not be ready until at least 2019.
    • The Permian gas constraints have raised the discount Waha trades vs. the U.S. Henry Hub benchmark in Louisiana to $4.03/MMBtu, its widest since September 2005 and compared with an average discount of $0.90 YTD, $0.27 in 2017 and a 2013-17 average of $0.14.
    • Analysts react to President Trump's threat yesterday of a 10% tariff on Apple's (AAPL -0.5%) iPhones.
    • UBS says the threat could be a "negotiating tactic ahead of the G20 Summit later this week." But the firm estimates the tariff, if it happens, would represent a $1.5B hit to Apple's earnings. If Trump raised the rate to 25%, as threatened, the hit would be about $3.8B or $0.83 in EPS.
    • Bernstein's Toni Sacconaghi says 25% of Apple's revenue would be subject to the 10% or 25% tariff. The analyst notes that China could retaliate through Apple supply chain disruption or iPhone sales blocks, which "could ultimately be even more devastating" than the tariffs.
    • Previously: Apple -1.6% as Trump hints at boosted phone/laptop tariffs on China (Nov. 26)
    • Previously: Apple suppliers mull higher iPhone tariffs (Nov. 27)

  33. Phil ? NVDA – I don't know where you're getting 7.2 p/e as $153 is $93.5Bn and they are, at best, projecting $4.5Bn in profits with 2018 in the can for them (Q4 is Q119) so not likely to be any upside surprises.   

    I don't have a PE af 7.2 I have them at 4.3B this yr  and 4.5 B in profit w/ 610M   M Shares out this gets you to about 7.05 EPS and 7.4. ( not 8) …  


  34. PZZA/Maya – Yet another lesson in why we take our stocks off the table when they are too high.  In the LTP Review, we adjusted the trade as we often do when they go too far over our goals:

    •  PZZA – It's only a $30,000 spread and we can pull $23,000 out now so is it worth waiting a year for $7,000?  I say take the $23.50 and run on the 20 2020 $35 calls ($47,000) and cash out the 15 short 2020 $42.50 puts at $1.40 ($2,100) and that leaves us with 20 short 2020 $50 calls at $11.25 and we'll cover them with 30 2021 $55 ($10)/70 ($3.40) bull call spreads at $6.60 ($19,800) so that's net $25,100 off the table and room to sell short puts down the road.  Now we've gotten almost all our potential cash off the table and still left a nice $45,000 spread as upside potential.

    So we took $44,900 off the table and spent $19,800 to cover the remaining short $50 calls because the VALUE of PZZA told us that it wasn't worth buying for more than $50.  So we put net $25,100 in our pockets as we deconstructed 20 2020 $35/50 bull call spreads with 15 short $42.50 puts that we originally bought for net $2,050.  If the short 2020 $50s expire worthless, whatever value is left on the bull call spread becomes a bonus for us but we're already up net $23,050 (1,124%) on cash since our Aug 22 entry.

    As is often the case, I'm effectively done with this trade.  I was never a huge fan of PZZA – just thought they were oversold back in Aug at $40 but then thought they were overbought in Nov at $60 but we made the trade at the optimum time and got out at the optimum time and now there are just scraps left for us to burn some more premium off on but, on the whole, I'm done with them and looking for the next interesting thing.


  35. NVDA/Batman – Ah, I thought you said p/e, not EPS.  Same thing though, trading over 20x EPS is the same either way – you're all going to have to get used to just saying no to companies trading at more than 20x earnings (5% returns) when bonds are giving people 4% without the risk!


  36. Wow, finished at the highs yet again.  RUT was disappointing but NYSE 12,188 – hanging onto 12,150!  


  37. My question this morning to you: Is Macy M a buy? Not sure? They should go up based on the Christmas sales, but it is all in the stars. Here my play Sell the Dec 28 put Vertical 33/30 for a credit of .79. Your breakeven is 32.21 and the PM margin is 152 per option play. That means if you should get assigned at 33 you bought the stock at 32.21. About 5% below the todays price.
    Macy pays at present a 4.46% div. and would be attractive for the armchair trade. You might think I should have bought that stock when it was trading just a year ago at 17, but these are Monday morning quarter plays. Have a nice day

    P.S. Sold yesterday the Jan21 50 PZZA put for 6.50 just like to see if we still can eat a pizza.


  38. Good morning!  

    Not much going on but drifting flat is good as we're re-forming a base (hopefully).

    M/Yodi – I like M as a real estate play (like SHLD once was) and hopefully they don't get taken over and destroyed by a Bankster like SHLD was.  M makes $1Bn/yr ($1.5Bn last year) but it's all in Q4, so hard to say how they are doing so far this year with $360M in profit so far but last Q4 was $1.3Bn and this Q4 should be close – probably a bit less.  Of course, last Q4 they were $25 into Jan ($16.50 in Nov) and they fell to $22 on earnings but then exploded to $44 during the year.  We got back in on the Sept/Oct dip in the LTP but we sold the short calls for income as we didn't see them popping into Jan:

    Long Call 2021 15-JAN 30.00 CALL [M @ $33.75 $1.19] 15 10/1/2018 (780) $13,650 $9.10 $-0.63 $9.10     $8.48 $1.10 $-938 -6.9% $12,713
    Short Call 2021 15-JAN 40.00 CALL [M @ $33.75 $1.19] -15 10/1/2018 (780) $-7,650 $5.10 $-0.20     $4.90 - $300 3.9% $-7,350
    Short Put 2021 15-JAN 30.00 PUT [M @ $33.75 $1.19] -10 9/26/2018 (780) $-5,250 $5.25 $0.35     $5.60 - $-350 -6.7% $-5,600
    Short Call 2019 18-JAN 35.00 CALL [M @ $33.75 $1.19] -10 9/26/2018 (52) $-3,000 $3.00 $-1.53     $1.47 $0.39 $1,530 51.0% $-1,470

    So we're up a little so far and I think that's the right range for them.  Not sure why you are suddenly into scalping short spreads – it's very Russian Roulette if you keep playing and eventually blows up in your face.  I see your worst case is a discount ownership but I can just sell the 2021 $33 puts for $7 one time and my net is $26, which is a 20% discount while you have to have 10 successful sales without ever getting burned to make the same $7.  And it's not like they don't make 10% moves in a month very often:

    So our trade sold 10 Jan $35s for $3 against the $30/40 spread and that was a 3-month sell for a net credit on the $15,000 spread and we have 8 Qs left to sell to generate $24,000 of premium sales while you're HOPING M behaves itself long enough to get 0.79 ($790 month) - no thanks! 

    https://www.philstockworld.com/toptrades/top-trades-for-wed-26-sep-2018-1121/

    M has come down far enough to be interesting but let's start small into earnings:

    • Sell 10 M 2021 $30 puts for $5.25 ($5,250)
    • Buy 15 M 2021 $30 ($9)/$40 ($5) bull call spreads for net $4 ($6,000) 
    • Sell 10 M Jan $35 calls for $2.70 ($2,700)

    That's a net $1,950 credit on the $15,000 spread and we have 8 more volatile quarters to sell.  If it goes down – we have a credit, so we don't care and, if it goes up, we're happy to buy more longs and roll the short caller.  


  39. Phil M thanks as usual for you comments. I do have your above play already only wating for the Dec 21 35 caller to expire.

    But M is a higher div. paying stock and therefore in a way a good armchair play. The Russian roulette is limited to a max loss of 221$ and with a margin of 152 per option play the return is  51% in 30 days.

    In general Stock with higher div. payments have smaller premium in there options. Therefore the put and option sales on the armchair trade gives me a better return. Obviously you need to have confidence in the stock, when you sell the put option.

    I agree with you mention is the future of M especially with a swing of 17 to 44 and now 33.80. Give you very much to think about the stability of the stock.