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Terrific Tuesday – Trade Talks Tempt Traders

Image result for trump wall cartoonHere we go again.  

It's day 2 of 90-day trade negotiations but that doesn't stop the market from ignoring TERRIBLE Industrial Production numbers out of Germany which paints a very ugly picture for the Euro Zone and Samsung just beat Apple by a mile, saying their Q4 operating profits will decline 29% but those look great compared to LG, who are warning their profits can slip 80% for the quarter.  Q4 is, by the way, the biggest quarter of the year for these companies.  

Of course, these are not American companies and American traders are famous for their "not in my backyard" attitude about profit warnings (or human rights violations or disease or poverty or starvation…) so the Dow (/YM) Futures are up 200 points, regardless, and then we'll all be "shocked and surprised" when a US tech company warns that things are slowing.  At least the good news for Apple (AAPL) is that they aren't losing any market share – it's just a crap market at the moment!  

Trump has a TV event scheduled for 9pm this evening about "Border Security" and then Thursday he will also spreak live from the border and it's widely expected that he will bend (or break) the Constitution and declare a National Emergency in order to move funds and resources to build his wall, over the objections of Republican and Democratic Congresspeople.  Invoking "National Security" measures is what all dictators do when they wish to consolidate their power.  Before Hitler was Chancellor in 1933, Article 48 of the Weimar Constitution was invoked more than 100 times and when the Generals seized power in Argentina in 1976, they invoked Article 23 of Argentina's Constitution and then used it like a club whenever they needed to trample some human rights. 

Image result for trump emergency cartoonAfter a coup in 1973, the new Government in Chile declared a State of Emergency that lasted for 15 years and Myanmar declared one as recently as 2012, imposing emergency powers to segregate the Muslims leading to many "disappearances".  Make no mistake, there is no "National Emergency" here, Trump is declaring an emergency to punish another branch of the Government for constitutionally exercising its authority.  As noted by the Washington Post:

Totalitarianism rises out of a process, not a single event. Declaring a state of exception in response to a political impasse would be a big step toward degrading an already vulnerable system. A fake emergency could trigger a real catastrophe — one that a split Congress would be unlikely to resolve and that a Supreme Court sympathetic to an imperial presidency might even worsen. We have more than a century of precedents at home and abroad to demonstrate all the ways things could go wrong.

I know people don't like is when I compare Trump to vile dictators but there aren't ANY examples of nice Governments using Emergency Powers – other than clear natural disasters and, even then, they almost never use them because they are far too extreme for rational people and far too dangerous because – once you put them in place – they can be badly abused.  Of course, badly abusing emergency powes is Trump's GOAL – not an unfortunate side effect…

The President has already taken one extreme step, forcing some 830,000 federal workers to work without pay or be furloughed because Congress wouldn’t accede to his petulant demand to spend billions of dollars on a bigger, longer wall along the border. In effect, Trump has taken nine federal departments and dozens of federal agencies hostage until he can force his will on the branch of government that, under the Constitution, holds the federal purse strings.

Immigrant children detained at the border, by the numbersThe President laid out a false premise Monday when he tweeted his plan to address the nation about “the Humanitarian and National Security crisis on our Southern Border.” There is no national security crisis — thousands of would-be immigrants seeking asylum do not constitute an invading army, and Trump has never backed up his assertions that the group is rife with terrorists. And while there is a humanitarian crisis, it’s one Trump could solve himself by expanding the nation’s capacity to handle asylum requests, rather than forcing migrants to spend weeks in squalid camps near ports of entry. It’s not as if the border is being overrun — detentions last year were roughly 75% lower than they were in 2000, though the number of children detained is up 11,000%.  

Notice that this "State of Emergency" is distracting the public from the Government Shutdown, which continues on Day 18 as well as the ramping up of the Mueller Investigation, which was just granted a 6-month extension of the Grand Jury – because there are that many more indictments to go through!  It's also distracting us from the China Trade Negotiations, which the entire Global Economy hinges on – but let's worry about a wall between US and Mexico instead…

As I noted yesterday, there's not much economic news due to the Government shut-down so who knows how our economy is actually doing – perhaps that's another reason Trump doesn't want the Government open – now he can make things up and there's no facts to check him against – BRILLIANT!  

We are still moving along inside our bounce ranges but making good progress and we do intend to test our Strong Bounce Lines and we gave you the Futures longs last week, which are still in play, of course.  The Nasdaq has taken back it's 50-day moving average at 6,488 and is well over that this morning (6,460 was the weak bounce line) so now we'll look for the russell to confirm with a move to it's weak bounce line at 1,470, which would be $2,500 per contract up from here (1,418), so still fun to play but be careful as a breakdown in the China Trade Talks can have us back to our lows in a flash-crash.  

Fortunately we have a master-negotiator as President! 


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  1. Nice little bounce but color me sceptical!

  2. Border / Phil – And yesterday the reported that Trump was off by 3,994 out of 4,000 on the number of suspected terrorists arrested at the Southern border. A slight mistake though so easily made by people like Goebbels for example.

  3. Good Morning!

  4. Not surprising at all:

    The Congressional Research Service published a paper in 2012 that found no correlation between top tax rates and economic growth. Congressional Republicans protested the findings, and the service briefly withdrew the paper.

    Republicans argued that the CRS paper had methodological errors, namely that it didn't account for the long-term benefits of tax rate cuts. The paper looked only at effects on growth within the first year of the cuts.

    POLITICO looked at each time the country changed the top income tax rate and the following five years of GDP per capita growth rate. The results are similar to the CRS findings: changing the top income tax rate does not have a predictable effect on economic growth.

    Charts at the link!

  5. Good morning! 

    Things are progressing nicely and we're generally bullish so all is well I think.

    Trump/StJ – Only exaggerating by 1,000x?  That's in the ballpark for the Liar in Chief.  The GOP would have impeached Obama for that statement alone!   It's funny how Bill Clinton was ACTUALLY impeached because he lied about getting a blow job but Trump now has a rap sheet a mile long and the Conservative Media says they don't see any "impeachable offenses".  So insane…

    Maybe Pence just terrifies them?  

    Image result for pence women

    Image result for pence dead eyes

    /NG finally making a nice move – congrats to the players on that one!  

    /RB is lagging so a good play over the $1.35 line with tight stops below.

  6. During the depths of the selloff Phil recommended some OTM TNA long calls to another member, just in case we rallied hard – April 55s I believe. I was still pretty short at the time so I put these on as an upside 'hedge'. They were right around $1 when I put them on and are currently around $3.50.  Good stuff.

  7. FU LB!!!!!

  8. Statement from Vanguard on inverse and leveraged ETFs which they will no longer permit their clients to trade – ugh! My IRA!

  9. What was the long recommendation from last week Phil is referencing??

  10. Parliament Vote on Deal Planned for Jan. 15: Brexit Update

  11. Lying Prices Keep America Hooked on Spending

  12. Don’t Reply to Your Emails

  13. Jabo your FU LB how many time did I tell you to stay off that BRA!!!!

  14. yodi—you sure did! what a pos!

  15. I did purchase some NLY and AGNC for future option trades. Good time to start selling 2021 NLY 10 puts.

    as well Mar 19 18 puts on AGNC

  16. Jabo I do hate buying a post stamp of material and paying a furtune for it

  17. live and learn ;-)

  18. ABX getting knocked down again?Any reason?

  19. Bought a few /NQs at 6493.

  20. Scalped a piece up 16.  Stop to entry.

  21. Rally failing already.

    TNA/Ati – Very nice, those are fun bounce plays.  

    Vanguard/Ati – Probably a lot of margin calls in the sell-off.

    Longs/Millard – We had a few Futures bottoms we called as trades back to the bounce lines.  Hopefully a chance will come to reload.  

    ABX/Jabob – Don't know what you are looking at.  ABX no longer trades, GOLD is the new symbol.  They are down with gold pulling back from $1,300. 

    As it turns out with ABX/GOLD – Our Options are now the standard GOLD options and old GOLD options are considered non-standard (as they were paid out in part cash) so nothing for us to do other than change the symbol and wait to see how the combined company reports earnings.

    Cannabis analyst sees $80B U.S. market by 2030

    • CNBC reports that top cannabis analyst, Cowen's Vivien Azer, is (predictably) bullish on the industry, forecasting an $80B market in the U.S. in 11 years. Other opinions/predictions:
    • Tilray (TLRY +4.5%) and Canopy Growth (CGC -1.3%) should outperform this year citing robust expected growth in Canada. She sees CGC sales ramping up from C$239M this year to C$778 in 2020. TLRY should get a boost from its expanded relationship with Novartis' Sandoz aimed at supplying non-smokable and non-combustible cannabis products where legally allowed. Her forecast for 2019 revenue is C$120M.
    • Big tobacco is eyeing the cannabis space, poised to make deals as the market develops

    Saudi Arabia moving toward investing in U.S. LNG sector – WSJ

    • Saudi Arabia is nearing a deal to invest in U.S. liquefied natural gas and has narrowed its focus to a shortlist of at least four U.S. LNG projects, with a deal likely to be announced in the first half of this year, WSJ reports.
    • Projects under consideration for Saudi investment include Tellurian's (TELL +3.7%) planned Driftwood LNG terminal in Louisiana and Sempra Energy's (SRE +0.3%) Port Arthur LNG project in Texas, according to the report.
    • Saudi Aramco’s potential deal to invest in U.S. LNG projects would mark a sea change in the energy flows between the U.S. and Saudi Arabia, which has long been a huge supplier of energy to America.

    Many mall owners don't embrace Sears rescue efforts

    • In most cases mall landlords dread the liquidation of a big retail chain, but in the case of Sears Holding (OTCPK:SHLDQ), many landlords are embracing it, the Wall Street Journal reports.
    • Mall owners Simon Property Group (SPG +0.5%) and Brixmor Property Group (BRX+1.7%) are part of a group that says Eddie Lampert's plan to keep Sears stores open would result in substantial costs without much hope for success.
    • The chain is "pursuing an unjustified and foolhardy gamble with other people's money," the creditor group said in court papers.
    • Taking back stores would allow landlords to regain cotenancy rights, which allow tenants to seek reduced rents if an anchor tenant or a certain number of tenants leave the shopping center. Sears has had control of such rights for decades, said some mall owners.
    • "There seems to be more value in the real estate than the rent Sears was paying," says Ami Ziff, director for national retail at real-estate firm Time Equities Inc.
    • Previously: Sears expected to pull liquidation lever (Jan. 8)

    PG&E tumbles another 10% after S&P cuts credit rating to junk

    • PG&E (PCG -9.9%) shares continue to plunge in early trading after S&P downgraded the utility's credit rating to junk with a negative outlook in the wake of massive claims stemming from the deadly California wildfires.
    • S&P cut the rating on PG&E and its Pacific Power & Gas unit to B from BBB-, the lowest tier of investment-grade ratings, citing political and regulatory pressure and uncertainty over its potential liabilities.
    • The ratings agency also expects PG&E’s capital access may be limited to secured debt issuance, restricting its financing options due to increased credit risks and media speculation on a potential bankruptcy.
    • Yesterday, PG&E shares plummeted more than 22% and its largest bond, a $3B note due in March 2034 with a 6.05% coupon, fell to a record-low bid price of $0.915 on the dollar while its yield rose to nearly 7%.

    Annaly Capital Management announces pricing of public offering of common shares

    • Annaly Capital Management (NYSE:NLY) priced a public offering of 75M common shares for expected gross proceeds of ~$731M.
    • The offering is expected to close on or about January 10, 2019.
    • Greenshoe option for an additional 11.25M shares.
    • Net proceeds will be used to acquire targeted assets under the Company’s capital allocation policy, which may include further diversification of its investments in agency assets as well as residential, commercial and corporate credit assets. The company also intends to use the net proceeds for general corporate purposes, including, without limitation, to pay down obligations and other working capital items.
    • Shares -2.7% PM.
    • Press Release

    Frontier -7.4% as Wells slashes price target, urges Sell

    • Frontier Communications (NYSE:FTR) is 7.4% lower premarket after a downgrade to Underperform and a slashed price target at Wells Fargo.
    • Analyst Jennifer Fritzsche cut her price target to $1.75 from $5. Shares closed yesterday at $2.72.
    • On a slide, they've declined 61.9% in the past quarter, but were having a good week, up 17.2%.

    Chain store sales sizzle again

    • The weekly reading by Johnson Redbook on chain store sales came in red-hot again at +8.9% to follow up on last week's mark of +9.3%.
    • Gift card redemptions are cited as one factor in the strong traffic and sales update

    Nasdaq launches water pricing index

    • Nasdaq (NASDAQ:NDAQ), along with Veles Water and WestWater Research, launches a water index that benchmarks the price of water that supports price discovery and enables the creation of a tradable financial instrument.
    • The Nasdaq Veles California Water Index is based on the volume-weighted average of the prevailing prices in five specific California water markets.
    • The index is calculated weekly, using a proprietary water index methodology developed by Nasdaq and Veles Water.

    Trump tweets on `really good' economic numbers, China talks

    • "Economic numbers looking REALLY good," President Trump tweets Tuesday morning.
    • In a separate tweet: "Talks with China are going very well!"
    • Also from his "economic numbers" tweet, Trump refers to his displeasure with the Fed's past interest rate hikes: "Can you imagine if I had long term ZERO interest rates to play with like the past administration, rather than the rapidly rising normalized rates we have today."
    • Futures for U.S. stock averages all point up. S&P +0.8%, Nasdaq futures +0.8%, Dow +0.9%, Russell 2000 +1.8%.
    • Coming up at 8:55 AM ET is Redbook chain store sales and at 10 AM job openings and labor turnover survey.
    • Previously: NFIB Small Business Optimism Index tops estimates (Jan. 8)

  22. SQQQ/Phil- I think you adjusted the hedge but I missed out on it.. what's the adjustment again?

  23. Scalped another /NQ piece up 25.

  24. I have 80 March SQQQ $15/22 as hedge. Should I roll long calls to June?

  25. That's 0.02 on /RB, by the way, a nice day move – don't be greedy. 

    SQQQ/Dave – Well here's what I said re. a new play:

    Monday/Pirate – Not sure if it's a half day or not (I don't think it is) but I will be scarce as I'll be up in Orlando that day.  Tuesday the markets are closed.

    So Happy New Year to all sensible enough to take a 4-day weekend!

    Hedges/Robert – I think the Nasdaq could still collapse so SQQQ is still valid.  Of course I love selling AAPL 2021 $135 puts for $15 as that's net $120 on the entry and I'd consider that free money so, as a hedge:

    • Sell 5 AAPL 2021 $135 puts for $15 ($7,500)
    • Buy 30 SQQQ June $13 calls for $5.50 ($16,500) 
    • Sell 30 SQQQ June $21 calls for $3 ($9,000) 

    That's net $0 out of pocket on the $21,000 spread that's $12,000 in the money to start so you can't lose money unless the Nas goes higher and then it becomes pretty unlikely that AAPL won't be higher too.  On the downside, if AAPL goes down, it takes the Qs with it and you collect $40 per share to buy your 500 AAPL shares with, netting you in at $80.

    For the OOP, we did this from our 75 June $12s and our 25 short June $17s:

    Submitted on 2018/12/26 at 2:10 pm

    • SQQQ – Damn, wish I got to this sooner.  The 75 June $12s were $9 this morning and now $7.50 but let's cash them at $7.50 ($56,250) and buy 50 2020 $15 ($6.80)/25 ($4.20) bull call spreads for $2.60 ($13,000) so we pocket $40,250 and we're still double-covering the short calls.  

    In the STP, we made the following adjustments:

    STP -  As noted to Batman above, we have the following SQQQ hedge in our STP:

    Long Call 2019 21-JUN 12.00 CALL [SQQQ @ $21.35 $0.00] 180 10/25/2018 (177) $56,160 $3.12 $6.53 $2.29     $9.65 $1.10 $117,540 209.3% $173,700
    Short Call 2019 15-MAR 22.00 CALL [SQQQ @ $21.35 $0.00] -100 11/23/2018 (79) $-14,500 $1.45 $2.35     $3.80 $0.08 $-23,500 -162.1% $-38,000
    Short Call 2019 21-JUN 17.00 CALL [SQQQ @ $21.35 $0.00] -80 11/20/2018 (177) $-28,000 $3.50 $3.20     $6.70 $0.95 $-25,600 -91.4% $-53,600

    So let's cash in our 180 June $12 calls and put $173,000 in cash in pockt and that leaves us with the short March $22s that are all premium and the short June $17s that are 2/3 in the money.

    Our new cover will be 200 of the SQQQ 2020 $15 ($8)/30 ($4.50) bull call spreads at $3.50 so that's $70,000 to buy us $300,000 worth of protection throughout 2019 – that should be helpful and we STILL put $100,000 back in our pockets off the original net $13,660 spread.  This is why the STP is up 270%!  

    We pocketed over $100,00 on TZA long calls too but now we have to pay the piper and cover the short calls.  Our current TZA position is:

    Short Put 2020 17-JAN 10.00 PUT [TZA @ $18.62 $0.00] -40 8/29/2018 (387) $-13,000 $3.25 $-2.61 $-51.96     $0.65 $-0.06 $10,420 80.2% $-2,580
    Short Call 2019 18-APR 11.00 CALL [TZA @ $18.62 $0.00] -100 10/24/2018 (113) $-6,000 $0.60 $7.13     $7.73 - $-71,250 -1,187.5% $-77,250
    Short Call 2020 17-JAN 15.00 CALL [TZA @ $18.62 $0.00] -200 11/30/2018 (387) $-31,000 $1.55 $4.53     $6.08 $0.13 $-90,500 -291.9% $-121,500

    We do think the market will bounce back but, if it doesn't, this is not a bag we went to hold so let's buy 200 of the TZA 2020 $15 ($6)/25 ($3.30) bull call spreads for $2.70 ($54,000) and that's not enough so we're going to roll the 100 April $11 calls ($8 – $80,000) and the 200 2020 $15 calls ($6 – $120,000) to 300 of the April $15 calls at $5 ($150,000) so we're taking $50,000 out of pocket in order to, hopefully, put the short calls into something that will have a better chance of expiring (and is more rollable, if not).  Worst(ish) case is TZA is still up and we buy another round of 2020 spreads and roll the 300 April $15s ($5) to 400 July $19s ($4) and then hopefully that helps.

  26. Moved stop up to 6525 on last piece of /NQ.

  27. Out for now.  Closed last piece up 50.

  28. Nly has issued 75 m of new stock with an option for another 11-12 million. Will be done "incrementally." They have MBS and sound like they are shuffling paper around & can basically use the $ for anything they want. BTW in the middle of a blizzard here in North country.

  29. NLY/Pirate – A fairly normal way to raise money for a REIT. They use the money lend out to get more cash-flow.  You just have to hope they are doing it because of demand and not because someone defaulted on them and put them in a bind!  

    Lot's of REITs and Home Builders looking cheap at the moment.  KBH, HOV, SKT…

  30. AAPL $151, things are progressing.

    Indexes getting their act back together.

    Bank of Canada expected to keep rates unchanged: WSJ

    • The Bank of Canada is expected to keep its benchmark overnight interest rate unchanged at a policy announcement Wednesday, allowing officials more time to assess the effect of low oil prices and financial-market volatility on Canada's economy, the Wall Street Journal reports.
    • Economists from all 11 primary dealers of Canadian government securities expect Canada's central bank to keep the key rate at 1.75%.
    • Those surveyed expect a total of two rate hikes, on average, this year. Financial markets, though, don't see any rate increases this year, according to overnight-index swaps.
    • Canada 10-year government bond yield slips 1 basis point to 1.94%.
    • Previously: Bank of Canada keeps overnight rate target at 1.75% (Dec. 5, 2018)

    Cook: Apple "underappreciated" by Street

    • In a CNBC interview, Apple's (AAPL +2.1%) Tim Cook says the company's devices and services are "probably underappreciated" by Wall Street.
    • Key quote, on market reaction: “We sort of look through all of that. We think about the long term. And so when I look at the long-term health of the company, it has never been better. The product pipeline has never been better. The ecosystem has never been stronger. The services are on a tear.”

    Manchester United to open club centers in China

    • Manchester United (MANU -0.7%) says it plans to open club entertainment and experience centers throughout China with a theme tied to the soccer club.
    • The first Manchester United Entertainment and Experience Centers are scheduled to open in Beijing, Shanghai and Shenyang by the end of 2020.
    • The company says the investment will deepen the special relationship the club has with China and the millions of fans that support the club in the nation.

  31. Speaking of REITS, I've put on a small position in MORL, a 2x leveraged mortgage ETN.currently yielding over 21 %.  It's largest holding is NLY with a 13.88% weighting.  AGNC carries a 9.96% weighting.

    With the Fed indicating a more dovish tone, think it's worth a small position.

  32. Phil,

    Thoughts on MDT ? P/E of 31. At 82 in btm half of range  (76-100). Slower growth noted; Just guided down,  perhaps due to expected drain on cash flow secondary to challenging ISRG in robotic surgery market. Thanks.

  33. MORL/Albo – Interesting that they pay more than the companies they hold.  Looks to me, however, that they are making monthly distributions that vary between 0.775 and 0.04 with big ones coming on the quarters so maybe that's a function of how they companies pay out.  Still, seems very interesting – they may be grossly undervalued and flying under the radar.  No options so I've never bothered looking but very interesting…

    MDT/8800 – I like them and we used to play them but they got expensive and $110Bn is still pretty expensive to buy $3Bn in earnings on $30Bn in sales.  Paying 3x sales is kind of nuts, they seem to be trending to $4Bn, which is nice margins but it's the same $30Bn in sales and they're not paying taxes so I'm not too comfortable with the whole thing.  

    I think going after ISRG is a natural step for them but ISRG only does $3Bn in sales (though $600M profit) so it's not a profound impact for MDT.  ISRG is another one we used to like but not for $55Bn!  

  34. Phil / CMG – following on from your comments yesterday on CMG, very curious as to how you view the price action over the last few days. That's more than a 15% price move in the last few days. It almost a gravitational pull to $500 (it's probably there by the time I am finished writing this!). With those short Jan $485 covers, do you just suck up into next week's OPEX, or look at it as a irrational move that reluctantly needs to be rolled up and out. If so, what action would you take now?

  35. Phil – on the CMG position you have in the LTP, I note that is a full cover – is that by design or circumstances - short calls that did not die on the vine?. Those Jan 485s roll to the Mar 520s, and just for reference to the Jan 2021, $760s (ridiculous, I know). Would you take that roll? How many chess moves ahead do you want to think?

    So many questions.

  36. Phil,

    Thanks for your thgts on MDT valuation.

    Markets look like they anticipate a pop from DT's bombast tonight. Your thoughts when time permits, please.

  37. Winston CMG I just did not enter the complete play just left with 7 short Jan 19 310 and 350 put.

    Trust they save for 10 days as I do not pay the .20 and .17 cents.

  38. Is there a seminar tomm? Thanks

  39. CMG/Winston – It's a MoMo, doesn't really get logic applied to it.  75x earnings for a fast food franchise is ridiculous but you can't tell that to the algos.  I doubt they top $500 but, for some reason, whenever they roll out new food, the stock goes nuts.  To me, it's not likely to bring in many more customers – just offering a fresh choice but hope springs eternal.  I think rising labor costs are going to hit them but, then again, easy comps to last year's food scares.   As to the covers, sure, suck it up and roll as we can roll way over $600 before we really have to deal with them.

    A Chipotle ad showing three salad bowls, reading: "Your Goals. Our Bowls. Try our new Lifestyle bowls: Keto, Paleo, Whole30, and Double Protein."

    Full cover in LTP was via circumstance as they were leftovers from an old position we cashed and the new longs are just a cover for those shorts, really.  As you note, 2021 $760s simply means we have a lot of outs – so not worth worrying about 50% below that target (and we can always DD the longs).

    Trump/8800 – I don't know what he can say that's market positive other than he has a deal on the wall to open the Government but that doesn't make sense since the Dems booked a rebuttal.  Most likely Trump is going to lie his ass off and tell the people to write to Congress and get the Dems to build him a wall – even though for the last two years the GOP has refused to build it.  The GOP likes this issue because they can blame any crime committed by an immigrant in the next two years on the Democrats so Trump is goading them into saying his crime statistics are BS and immigrant crime is not a problem so he can quote while showing you pictures of murder victims in 2020.  That's what this is all about.  Also, Trump will get a $1Bn kickback on building the wall from the contractors – that's important too!  

    Webinar/Pirate – Yes, we'll have a full one tomorrow.

  40. Phil / CMG – thanks. As to DD the longs, do you mean roll the current 20, long Jan 2021, $480s – to the Jan 2021 $440s (which would cost currently $20 – so gaining $40 in strike for $20, or would you layer on a Jan 2021, $480 / $520 for $24 - so gaining $40 upside for $24?. Those examples are just to keep the comparison basis similar.

    Which leads me to another question (which I don't know why I have never asked before?): which is better, gain the advantage of going closer to ITM but not increasing the exposure in number of contracts, OR, increasing the number of contracts by an additional layering?

    Layering reduces the ratio of BCS to short covers (good), but increases size and exposure (bad)

    Rolling the long calls down keeps the short cover ratio the same (neutral to bad), but keeps position size the same (good).

    I know the right answer is 'it depends'. But I like to push you for deciding the toss. Up until now, I have mostly gone for layering on additional BCS, but with some of these MOMOs they have a habit of outrunning you as your position size gets bigger. I seem to remember you advising with runaway short covers the idea is to reduce overall position size, not increase it.

  41. Yodi – expiring puts – Happy Days! Well done.

  42. President Trump Address/Democratic Response

  43. Trump Makes His Case for a Border Wall as Shutdown Drags On

  44. CMG

    KeyBanc expects strong Q4 from Chipotle

    KeyBanc bumps up its price target on Chipotle (CMG +0.4%) to $525 from $500 on the expectation for a positive earnings preannouncement.

    The firm hikes comparable Q4 sales and EPS estimates in advance of the restaurant operator's earnings report.

    Chipotle is slotted at Overweight by KeyBanc.

    What to watch: Chipotle is due to present next week at the ICR conference.


  45. Fact-checking Trump’s immigration speech

  46. 6 of the Most Promising Products We Saw at CES 2019

  47. Batman – good to know. They'll be talking up guacamole and refried beans again! 

    What does your valuation model tell you on fair value now and going forward on CMG?

  48. The Crisis Is in the Oval Office

  49. Good morning!  

    CMG made $1.34 last Q and expected to make $1.31 this Q so estimates may be low (purposely?) as last year's comps were not good but they were $345 in Jan and fell to $245 AFTER reporting $1.34 in earnings so, at $500 – they'd damned well better beat by a mile!   At $500, even if they earn $10 for the year, that's 50x earnings and this company has barely grown since 2015 and, back then, they were dropping $450M to the bottom line so $14Bn wasn't too bad (still double MCD's p/e) but against MAYBE $200M this year – nope, gotta call the top at $500.

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 2,731 3,215 4,108 4,501 3,904 4,476 4,750 4,832 5,217 +10.4%
    Operating Profit $m 455.9 532.7 710.8 763.6 34.6 270.8 278.8     -9.9%
    Net Profit $m 278 327.4 445.4 475.6 22.9 176.3 188.3 235.9 331.5 -8.7%
    EPS Reported $ 8.75 10.5 14.1 15.1 0.77 6.17 6.74     -6.7%
    EPS Normalised $ 8.84 10.6 14.3 15.4 1.25 6.47 8.46 8.53 12.0 -6.1%
    EPS Growth % +28.6 +19.9 +34.6 +7.6 -91.9 +419.5 +30.7 +31.8 +40.3  
    PE Ratio x           76.9 58.8 58.3 41.6  
    PEG x           2.42 1.85 1.45 1.46

    That doesn't mean the beautiful sheeple won't run it higher – just that that's where the fair value tops out and $420 is probably the mid-point of a 20% range.

    This is what kills me:  Zacks, who used to do solid research, now has reports written by computers and people think it's analysis but the gist of this report is that they expect CMG to go up because it went up before and it will beat earnings because it beat before – what a smart little algorithm I am!!!

    Why the Earnings Surprise Streak Could Continue for Chipotle (CMG)

    Zacks Equity Research

    ZacksJanuary 8, 2019

    Have you been searching for a stock that might be well-positioned to maintain its earnings-beat streak in its upcoming report? It is worth considering Chipotle Mexican Grill (CMG), which belongs to the Zacks Retail – Restaurants industry.

    When looking at the last two reports, this Mexican food chain has recorded a strong streak of surpassing earnings estimates. The company has topped estimates by 5.62%, on average, in the last two quarters.

    For the most recent quarter, Chipotle was expected to post earnings of $2 per share, but it reported $2.16 per share instead, representing a surprise of 8%. For the previous quarter, the consensus estimate was $2.78 per share, while it actually produced $2.87 per share, a surprise of 3.24%.

    Price and EPS Surprise

    Thanks in part to this history, there has been a favorable change in earnings estimates for Chipotle lately. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the stock is positive, which is a great indicator of an earnings beat, particularly when combined with its solid Zacks Rank.

    Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat the consensus estimate could be as high as seven.

    The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.

    Chipotle currently has an Earnings ESP of +9.29%, which suggests that analysts have recently become bullish on the company's earnings prospects. This positive Earnings ESP when combined with the stock's Zacks Rank #3 (Hold) indicates that another beat is possibly around the corner. We expect the company's next earnings report to be released on February 6, 2019.

    Investors should note, however, that a negative Earnings ESP reading is not indicative of an earnings miss, but a negative value does reduce the predictive power of this metric.

    Many companies end up beating the consensus EPS estimate, but that may not be the sole basis for their stocks moving higher. On the other hand, some stocks may hold their ground even if they end up missing the consensus estimate.

    Because of this, it's really important to check a company's Earnings ESP ahead of its quarterly release to increase the odds of success. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

    This is the kind of crap people rely on these days. 

  50. Winston / CMG – I've got them at an EPS of 8.6 / 11.2 and 14.5 -for '18 '19 ….  with a 30 X multiple this has them at 430  sh price target – MAX….    this is fairly aggressive but they  have not had a lean year relative to health scare – I think new CEO will improve this….