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Faltering Thursday – Market Shrugs off “Framework” for China Trade Deal

Image result for us china trade dealUh-oh!

Early this morning the US and China announced they had made "significant progress" and have outlined "commitments in principle" with Negotiators are drawing up six memorandums of understanding on structural issues: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.  The Chinese are even coming to Washington TODAY to continue their "fruitful" discussions of last week – actually attempting to hit the March 1st deadline for a deal.

You would think the Dow would be up at least 200 points on this news – but noooooooooooooo – it's down slightly and if a trade deal isn't going to be a good catalyst – then I am worried that we don't have a catalyst to take us any higher than we are now. 

As you can see – there was a pop around midnight, when the announcement hit the wires but it has since faded out while the Russell made it right to our stopping line at 1,590 but failed there, so it's game on for the Russell Fututures (/RTX) shorts we discussed yesterday (we already had some small winners) – despite the "great" trade news.

We got a very doveish Fed Report yesterday and that didn't help much – especially considering the Dollar was down 1% – so the markets should have been much higher in yesterday's action.  These are all signs of rally exhaustion and we still have our hedges in place from last week and I would strongly suggest you take some time to make sure your own portfolio is well-protected.

The Dow is up 1,000 points (3.7%) from the Feb lows and up 4,300 points (19.8%) from December's low of 21,700.  If we call the Dow low 22,000, a 20% run would take us to 26,400 but a 4,400 point run would have an 880-point weak retrace (25,520) and a 1,760 strong retrace could take us back to 24,460 without even breaking the downtrend.  On our other indexes, we should be watching:

  • S&P 2,400 to 2,880 would be a 20% run and retraces would be 2,784 (weak) and 2,688 (strong) 
  • Nasdaq 100 6,000 to 7,200 would be a 20% run and retraces would be 6,960 and 6,720
  • NYSE 11,000 to 13,200 would be a 20% run and retraces would be 12,760 and 12,320 
  • Russell 1,300 to 1,560 is a 20% run (that's why we're shorting them – as they are over) and retraces would be 1,508 and 1,456.

It's mostly going to be "watch and wait" into the weekend and we'll see what holds.  As long as we're over those 200-day moving averages – all is well but, as I predicted earlier in the week – it was more likely going to be the top than the start of another leg higher – with or without a China deal.

 

 

 

 

 

 

 

 

IN PROGRESS 

 


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  1. Microsoft CEO Satya Nadella on his toughest challenges and biggest competitors



  2. This panel will lead to very scientific conclusions I am sure:

    https://talkingpointsmemo.com/news/panel-to-advise-trump-if-climate-change-is-national-security-threat-led-by-denier

    The Trump administration is exploring the idea of forming a special committee to look at climate change and security risks, with the effort being coordinated by a 79-year-old physicist who rejects mainstream climate science.

    Next, they will have a panel to study civil aviation led by a "contrail" expert! Or a panel on medical technology with Dr. Voodoo.


  3. I have to say that this Samsung folding phone looks pretty interesting but crazy expensive. I assume that eventually prices will come down. For people who don't need a 7" screen, they could make a foldable phone that fits in the palm of your hand I guess.


  4. Good Morning!


  5. Phil,

    I have a march @260 DPZ put and based on their results this morning seems like the street was not very happy. Would you recommend any adjustments? 

    Thanks

    Pat


  6. Good morning! 

    Nothing bad about a rejection at /ES 2,800 – very normal, even if we are rallying higher.  The trick is to watch those retrace lines and see if they hold.  Even though we have not yet completed the 20% move – if the 20% move is going to happen, then the retracement lines of the 20% move should be support on a pullback.

    As you can see on the Big Chart, Dow, S&P and NYSE are well over the 200 dmas but the Dow is meaningless so really it's 2 over and 2 under and whichever side gets a 3rd first (not counting the Dow) is likely to be the winner.

    Panel/StJ – It's amazing to have a Government that is conspiring against the American people.

    Samsung/StJ – If it weighs the same and has the same footprint/pocketprint and is an Apple – I'd be interested.  I very often debate whether or not it's worth bringing my IPad when I think I'll be reading a lot and usually I make due with my phone to avoid the hassle of lugging the pad around so I'd love a phone that's usually a phone but a small IPad in a pinch.  

    Nice dip on /RTY to start out day!  

    DPZ/Pat – Same-store sales missed but up 5.6% vs 7.2% expected in a rough quarter for the food industry.  International sales also slowed but margins improved a lot (38.2 vs 31.5) as the reason sales slowed is last year they had that huge campaign that they had fixed the food and you should try them again (they lied – same crap).  

    Nonetheless, DPZ is not AAPL and they can't "choose" to make more money on less sales because that's not the way they are structured and earnings missed by 0.07 – but that's out of $2.62 so really not a big deal either.

    As you know, I'm not a fan – we discussed them Tuesday:

    DPZ/Pat – Well having a better product than Domino's is a very low bar but I'm no fan of Blaze either.  Of course, most of the country has crap pizza and doesn't know any better, so it's all about the numbers and DPZ is way overpriced at $280 ($11.5Bn) with less than $3Bn in sales and $300M in profits.  They've been in business for decades so it's not like they will suddenly pop up to even $550M to bring the p/e down to 20 in the near future. Still, to play something long I don't need a reason as, ultimately, I end up owning it so, if I'm right, it eventually goes up.  Shorting gives you a new chance to be proven wrong every year and you have nothing to show for it if you're wrong other than losses.

    DPZ has earnings this week so I wouldn't play at all and hope they pop back to $300 so I could sell calls (assuming we don't think earnings are a game-changer).  The Jan $300s are $23 and the $270s are $36 so anything over the middle ($30+) and I love selling the call.   As to a bear spread – again, not ahead of earnings but I'd rather buy the 2021 $240 puts for $20 and sell the April $270 puts for $10 so, if DPZ does go up, you are in the long puts for net $10 and, if DPZ goes down – RAWHIDE

    It looks like you just bought? the March $260 puts for a mystery price and now they are at $257 and those puts are $9.50 so I'm not sure what "adjustments" you expect to make – just put a stop on the winnings but a 10% pullback for the day is likely as good as it gets off that report.

    As to my idea, the 2021 $240 puts are now $27 and the April $270 puts are $19 but, of course, the point was that the April puts can be rolled (the Sept $250 puts are $20) and it eventually turns into a bear spread – even if the short puts don't go worthless.  If you risked just buying March puts and made money – be happy with that.




  7. Wary Investors Reach for Gold




  8. Consumer debt hits $4 trillion



  9. The M play from this morning just filled and the T is already up to 31 $ !!!!


  10. TOS question to all--

    What do you do with your "cash"?

    Just leave it in the cash 'sweep' vehicle?  Or is there a better place to put it so it earns more than .01 %?


  11. KO not to bade at 45, we discussed it the other day has not gone anywhere. I entered my original plays at 42, but I feel 45 still looks good. Sell the April 45/46 strangle for 1.55 and buy the stock presently trading at 45.50. Combined monthly return 2.1%.


  12. JeffL I take it !!!


  13. Yodi -

    I actually answered you back in last Friday's (option day) chat when you posted your watchlist – it was at the end of day so not sure if you saw it..  Thanks for posting all of the new possible trade ideas as always.  


  14. Another good day for /NG.  

    M/Yodi – Always good to buy Blue Chips on sale.

    CASH!!!/Jeff – I let it sweep but my cash isn't doing nothing, it's margin so, if I have $50,000 that's not doing anything, I can sell 5 IBM 2021 $120 puts for $10 ($5,000), using $6,000 in margin and maybe sell 10 WMT 2021 $85 puts for $5 ($5,000) for $8,500 in margin and, assuming I have $100,000 in margin on the $50,000, I still have $85,500 in margin available and I'm still getting my sweep interest (such as it is) but I'm also making $10,000 (20%) on $50,000 over 2 years (or I'm getting 20% off entries on IBM and WMT).   

    Oil inventories net neutral – not likely to help but /RB off to the races at $1.617 – I'd short them below $1.62 with tight stops above.

    • EIA Petroleum Inventories: Crude +3.7M barrels vs. +3.1M consensus, +3.6M last week.
    • Gasoline -1.5M barrels vs. -0.4M consensus, +0.4M last week.
    • Distillates -1.5M barrels vs. -1.7M consensus, +1.2M last week.
    • Futures -0.37% to $56.95.

  15. Jeff Joke aside the cash is always a buffer against your option plays especially your put sales.. I prefer to have at least one third  of my port in cash aside. This gives your port better stability. Regret no interest being paid. As they say you can not have the cake and eat it.

    If you have a good arsenal of stock you may reduce your cash.







  16. Jeff you welcome. Just remember I only like to enter or buy a stock when it is for sale, bottom end of the scale, Many of them are now way up.!!!


  17. Yodi – for your strangles - 

    "Even that I like T better at 29, I think it is worth a toss at 30.85 for an armchair trade.

    Sell the May 32/30 strangle for 1.46 and buy the stock. combined monthly return 2.2%."

     

    Are you selling the May 32 call and selling the May 30 put?


  18. Speaking of things to do with CASH!!!  HOV is 0.67 and you can sell the Aug $1 calls for 0.15 so net 0.52 means future sales pay 20% every 6 months (if you don't get called away with a 100% gain).  They are likely to do a reverse split but let's buy 10,000 shares for $6,700 in the OOP and sell 100 of the Aug $1 calls for 0.15 ($1,500) and that's net $5,200 for our entry.  

    Earnings were pretty good on 12/6.  I like betting HOV when they are down as it's a 100-year family business that seems to navigate the market's ups and downs fairly well – you just have to be patient. 

    Hovnanian Enterprises (NYSE:HOVjumps 9.1% after fiscal Q4 EPS beat consensus as average price of homes delivered rose at a faster pace than the number of homes delivered.

    Q4 EPS of 30 cents beat consensus by 10 cents and compares with 8 cents a year ago.

    Q4 deliveries, including unconsolidated joint ventures, increased 2.4% to 1,829 homes from 1,787 a year ago; average price of homes delivered rose 8.1% to $462,254 vs. $427,741 a year ago.

    Q4 homebuilding gross margin of 16.5% increased from 13.7% a year ago.

    Q4 contracts, including unconsolidated joint ventures, declined 12% to 1,179 homes from 1,344 a year ago.

    Q4 adjusted EBITDA increased to $89.9M from $81.1M Y/Y.

    Q4 total revenue slid to $614.8M from $721.7M a year ago.

    The company, though, is optimistic that housing sales will pick up as the home buyers adjust to higher mortgage rates. "Given the overall demographic trends and the strong U.S. economy, as home buyers become adjusted to the higher mortgage rate environment, expectations will likely adjust and the housing market should resume its path of recovery,” says Chairman, President, and CEO Ara K. Hovnanian.

    Conference call at 11:00 AM ET.

    Previously: Hovnanian beats by $0.10, misses on revenue (Dec. 6)

    Year End 31st Oct 2013 2014 2015 2016 2017 2018 2019E 2020E CAGR / Avg
    Revenue $m 1,851 2,063 2,148 2,752 2,452 1,991 1,841 1,910 +1.5%
    Operating Profit $m 130.3 128.3 97.9 134.9 91.5 122.5     -1.2%
    Net Profit $m 31.3 307.1 -16.1 -2.82 -332.2 4.52 -7.80 -0.10 -32.1%
    EPS Reported $ 0.22 1.87 -0.11 -0.019 -2.25 0.030     -32.7%
    EPS Normalised $ 0.22 1.87 -0.11 -0.005 -2.10 0.057 -0.050   -23.5%
    EPS Growth %   +757.7              
    PE Ratio x           11.8 n/a n/a  
    PEG x           n/a n/a n/a
    Profitability

    In a good year, they can make a few hundred Million yet you can buy the whole company for $100M and here's the last 6 Qs ending in Q3 2018:

    Operating Profit/Income -13.9 47.3 12.2 24.0 23.2 63.2

    Nothing wrong with that!  Net Income needs work:

    Net Income -337.2 11.8 -30.8 -9.82 -1.03 46.2

    They have $188M in cash and are servicing their debt ($1.7Bn) so I doubt they are going BK but that's what they are priced like.


  19. Soma yes correct.


  20. Interest/ IB pays the best interest on idle cash 1.8% or so.


  21. Interest- I have been talking to TDA/TOS about this very subject. They are essentially ripping us off on the piddling yield on cash. IB does have a good rate as does Schwab. TDA has some money market mutual funds that are not listed on their site but tell me I can get them TOS but they have holding period restrictions etc. so more BS than it is worth. 

    I would encourage all TOS users to send an email or call and bitch about the pathetic treatment. You can bet they are using our idle balances in some fashion and we are not getting any compensation. It is a very competitive business so mentioning your attraction to IB and Schwab usually gets some attention. 


  22. Yeah, that is ridiculous.  They lowered it with the Fed and never put it back.


  23. Pstas, Interest.
    I think it would be very dangerous for TDA to mingle with client’s cash or accounts.
    I did experience this once with another broker who did this. SEC closed the whole shop and froze all accounts for one year.
    Thank God I only had stocks with them no options, as you were not able to close them. My friend lost an arm and a leg, as he could not move the options.


  24. Big bounce on /NQ off 7,000 got everyone else moving back up.  

    Nice win on /RB – That was free money!


  25. anyone have any thoughts on the CHK price action? 



  26. Tesla -1.7% as Consumer Reports pulls Model 3 recommendation

    • Tesla (NASDAQ:TSLA) has quickly slipped further into negative ground, -1.7%, after a new reliability survey from Consumer Reports says the organization can no longer recommend the Model 3 sedan.
    • Many of the issues are in electronics, CR's Jake Fisher says: "There are some issues replacing the (navigation/infotainment) screens, for instance, but we've seen other issues in terms of the trim breaking and the glass."
    • Tesla responds by saying it's already made significant improvements to address the issues that CR came up with.
    • The new CR data comes from an annual survey that runs from July to September, the company says, so "the vast majority of these issues have already been corrected through design and manufacturing improvements, and we are already seeing a significant improvement in our field data."

    More on Teekay LNG Partners Q4 results

    • Teekay LNG Partners (TGP +8.5%) says that during Q4 cash flows and adjusted earnings were up significantly over the prior quarter as its LNG segment grew and certain existing vessels commenced new contracts at firm rates.
    • Q4 voyage revenues increased 19% to ~$150M; generated total cash flow from vessel operations of $150.1M
    • TGP says that its LNG segment results are expected to be significantly higher in 2019 primarily due to the delivery of 15 newbuilding LNG carriers during 2018 and throughout 2019 as well as the start-up of the Bahrain LNG re-gasification terminal in 2019.
    • For FY19, anticipates adjusted net income per common unit of ~$1.85 to $2.20 and total CFVO of $635M-$660M
    • Previously: Teekay LNG EPS in-line, beats on revenue (Feb. 21)

    30-year mortgage rate drops to lowest in over a year: Freddie

    • U.S. mortgage rates dropped for third straight week, with the average 30-year fixed-rate mortgage rate dropping to its lowest weekly reading since Feb. 8, 2018, according to the Freddie Mac Primary Mortgage Market Survey.
    • 30-year FRM averaged 4.35% for the week ending Feb. 21, down from 4.37% in the prior week; a year ago at this time the rate averaged 4.40%.
    • "Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months," says Freddie Chief Economist Sam Khater.
    • 15-year FRM averaged 3.78% vs. 3.81% W/W and vs. 3.65% a year ago.
    • 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.84% vs. 3.88% from the previous week and 3.65% a year ago.
    • Previously: Existing home sales slip again in January (Feb. 21)

    Windstream wraps broadband upgrade ahead of schedule

    • In a small bit of positive news in the wake of the company's devastating trial loss, Windstream (WIN -9.3%) says it's wrapped up a broadband speed upgrade initiativeahead of schedule.
    • A plan to double the availability of its 100-Mbps Kinetic Internet Service is done about six weeks ahead of plan. That means 34% of households in local exchanges across its 18-state footprint now qualify for that speed, vs. a target of 30% by the end of March.
    • About 50% of households now qualify for 50 Mbps. It now expects about 40% of households will qualify for 100 Mbps by mid-year.
    • Meanwhile, Windstream and Aurelius are expected to be in discussions now, and Windstream with its creditors, ahead of Monday's deadline for a draft judgment in their case. Uniti Group (NASDAQ:UNIT), heavily dependent on its master lease with Windstream, is 7.9% lower today.

    Eyes turn to Buffett's Berkshire Hathaway this weekend

    • Investors will be looking at Berkshire Hathaway's (BRK.A -0.6%) (BRK.B -0.6%) Q4 results and the Oracle of Omaha's annual letter for clues on how much stock it bought back and what its plans are for the $103.6B of cash it had as of Sept. 30, 2018.
    • Big acquisitions are harder to come by as the legendarily frugal Warren Buffett faces more competition from private equity firms sitting on piles of cash.
    • His last big deal was the $32B acquisition of Precision Castparts in January 2016.
    • Berkshire's annual report, Q4 results and annual letter to shareholders will be released at about 8:00 AM ET on Saturday, Feb. 23.
    • Previously: Berkshire's Apple trim wasn't Buffett (Feb. 15)

    Leading indicators edged lower in January, misses estimates

    • January Leading Indicators: -0.1% to 111.3 vs. +0.1 consensus, -0.1% prior.
    • Coincident Economic Index +0.1% to 105.5.
    • Lagging Economic Index +0.5% to 106.7.

    Existing home sales slip again in January

    Philadelphia sues seven banks over muni deal "collusion": Bloomberg

    • JPMorgan Chase (JPM) and Bank of America (BAC -0.1%) are among seven banks being sued by the city of Philadelphia, which alleges that the banks worked together to fix the prices of on floating-rate bonds issued to finance public works, Bloomberg reports.
    • According to a class action filed in federal court in Manhattan Wednesday, the city claims the banks conspired to inflate the interest rates on the bonds from as early as 2008.
    • The suit seeks to represent a group including municipalities, hospitals, and universities.

    PMI Composite Flash comes on stronger than expected

    • February U.S. PMI Composite Flash55.8 vs. 54.4 consensus 54.5 prior.
    • Manufacturing PMI 53.7 vs. 54.3 consensus, 54.9 prior.
    • Services PMI 56.2 vs. 54.2 consensus, 54.2 prior.

    Newmont Mining +2% as Q4 earnings, sales top expectations

    • Newmont Mining (NYSE:NEM+2.1% pre-market after easily beating Q4 earnings and revenue expectations, helped by higher gold production in its Colorado and Ghana mines and lower costs.
    • NEM says its Q4 gold production rose nearly 8% to 1.44M oz. while all-in sustaining costs fell to $835/oz. from $910/oz., which helped offset a 3% drop in average realized gold prices to $1,233/oz.; copper production was roughly flat at 11K metric tons.
    • The miner reiterates guidance for FY 2019 gold production of 5.2M oz. at all-in sustaining costs of $935/oz.
    • NEM is set to overtake Barrick Gold as the world's largest gold producer following its acquisition of Goldcorp, which is expected to close during Q2.

    heesecake Factory guidance factors in 6% wage inflation

    • Execs with Cheesecake Factory (NASDAQ:CAKE) updated the company's guidance during the post-earnings conference call.
    • The restaurant operator expects to report comparable sales growth of 1.5% to 1.8% in Q1 and +1% to +2% for all the full year. EPS of $0.58 to $0.62 is anticipated for Q1 vs. $0.62 consensus and $2.54 to $2.70 for the full year vs. $2.67 consensus.
    • Dragging on the bottom line a bit, Cheesecake Factory said it expects wage inflation of about 6% for the full year.
    • Shares of Cheesecake Factory are up 1.34% in premarket trading to $47.00.
    • Previously: Comp sales up 2% at Cheesecake Factory (Feb. 20)

    Core durable goods shy of estimates

    • Dec. Durable Goods: +1.2% vs. +0.8% expected, +1% prior (revised).
    • Core Durable Goods +0.1% vs. +0.2% expected, -0.2% prior (revised).

    Samsung's Fold could create "problem" for Apple – Goldman

    • Goldman Sachs says Samsung's (OTC:SSNNF,OTC:SSNLFnewly unveiled Galaxy Fold offers "a compelling form factor that only Samsung's foldable OLED technology can deliver" and that, should the form factor spark interest, Samsung could delay Apple's (NASDAQ:AAPL) access to the tech.
    • Goldman: "We see this as a potential problem for Apple this year though the lack of a device at this point drives us to reserve judgment."

  27. That last one cracks me up.  Just two months ago there were downgrading AAPL because their $1,300 phone was too expensive and now they say Samsung's $2,000 phone will dig into AAPL's sales?  What idiots!  


  28. Cruise line sector on watch after strong Norwegian outlook

    • Carnival (NYSE:CCL) and Royal Caribbean (NYSE:RCL) are on watch after Norwegian Cruise Line Holdings issues a confident outlook for Q1 and 2019.
    • Norwegian's report was a little deeper into the Wave Season than either Carnival (reported in December) or Royal (reported in January), giving the company a broader look at booking trends.
    • Both CCL and RCL are up slightly in premarket action.
    • Norwegian Cruise Line Holdings (NASDAQ:NCLH) trades higher after recording a Q4EPS beat and setting a positive outlook for the full year ahead.
    • Norwegian's net yield during Q4 of 4.2% was ahead of its guidance of +3.75% and the consensus mark of 3.9%. Net cruise costs were up 3.4% during the quarter. Fuel price per metric ton was $496 vs. $460 a year ago.
    • Looking ahead, the company expects Q1 EPS of $0.70 vs. $0.58 consensus and full-year EPS of $5.20 to $5.30 vs. $5.15 consensus. The cruise line operator's booked position was at an all-time high entering into 2019 and at higher pricing.
    • "Our cash generation continues to accelerate and we remain keenly focused on returning meaningful capital to our shareholders, already returning approximately one-third of our three-year targeted capital distribution," says Norwegian CFO Mark Kempa.
    • Previously: Norwegian Cruise Line Holdings beats by $0.06, misses on revenue (Feb. 21)

    Fannie trims Q1 growth forecast, maintains year view

    • Fannie Mae (OTCQB:FNMA) holds its 2019 forecast at 2.2% growth compared with 3.1% growth in 2018 as fiscal stimulus moderates investment growth and a widening trade deficit contributes to the Y/Y slowdown.
    • Fannie's Economic and Strategic Research Group trims its Q1 growth forecast by 0.1 to 1.7% on expectations of a slight slowdown in consumer spending.
    • Continues to expect only one Fed rate hike this year.
    • Sees total home sales in 2019 essentially flat.
    • "On housing, a reduction in our forecast of existing home sales has our team projecting fewer 2019 purchase mortgage originations," says Chief Economist Doug Duncan.
    • Decelerating house price appreciation and slower interest rate increases should provide some support for sales after the decline of last year, according to the group.

    Gogo -4.7% on downside FY19 outlook

    • Gogo (NASDAQ:GOGOdrops 4.7% pre-market on Q4 results that beat revenue estimates but missed on EPS. Downside FY19 guidance has revenue from $800M to $850M (consensus: $903.20M) with adjusted EBITDA of $75M to $95M, sales increase of 400 to 475 in 2Ku aircraft online, and $100M improvement Y/Y in FCF.
    • In Q4, adjusted EBITDA was $19.4M and 109 2Ku aircraft were placed online.
    • Earnings call starts at 8:30 AM ET with a webcast here.
    • Press release.
    • Previously: Gogo misses by $0.01, beats on revenue (Feb. 21)

    Dine Brands Global +2% on earnings beat

    • Dine Brands Global (NYSE:DIN) reports franchisee revenue rose 21.2% to $174.6M in Q4.
    • Applebee's comparable same-restaurant sales grew 3.5%.
    • IHOP's comparable same-restaurant sales up 3%.
    • Gross margin rate improved 670 bps to 45.9%.
    • Adjusted EBITDA increased 66.7% to $65M.
    • Restaurant count: Applebee's -90 Y/Y to 1,846; IHOP +46to 1,808.
    • FY2019 Guidance: Applebee's domestic system-wide comparable same-restaurant sales: +2% to +4%; IHOP's domestic system-wide comparable same-restaurant sales: +2% to +4%; G&A expense: ~$165M to $170M; GAAP net income: ~$104M to $113M; Adjusted EBITDA: ~$268M to $277M; Diluted EPS: $6.15 to $6.45; Adjusted EPS: $6.90 to $7.20.
    • DIN +1.68% premarket.
    • Previously: Dine Brands Global beats by $0.13, beats on revenue (Feb. 21)

    U.S. healthcare spending to rise 5.5% per annum over next decade

    • According to the Centers for Medicare & Medicaid Services (CMS), U.S. healthcare spending is expected to rise 5.5% each year over the next decade, reaching ~$6T by 2027 (19.4% of GDP).
    • Medicare spending is expected to rise 7.4% per annum over the same period, above 5.5% for Medicaid and 4.8% for private insurance plans.
    • Medicare enrollment should peak at 2.9% this year.
    • Prescription drug spending is forecasted to rise 5.6% per year between 2018 and 2027 as is hospital spending.
    • By 2027, federal, state and local governments are projected to fund 47% of national healthcare spending (45% in 2017).

  29. So that last item indicates our current $3Tn annual Health Care Spending with grow to $5Tn over the next 10 years – great!  


  30. Things are turning worse for no particular reason – not good.

    No news at all, just the guy's sneaker blowing up and AAPL launching a credit card (and getting no credit for it).

    Apple, Goldman to Launch Credit Card Paired With iPhone

    The companies hope to lure cardholders by offering them extra features on Apple’s Wallet app, which will let them set spending goals, track rewards and manage balances. 69

    Yikes, His Nikes! Zion Williamson’s Sneaker Disaster

    Wow, you can't fool all of the people all of the time…

    U.S. Campaign Against Huawei Increasingly Falls on Deaf Ears

    The Chinese company’s low prices outweigh spying concerns for many countries ramping up 5G spending, in particular the pivotal internet market of India. “The perception here is that the U.S. action is more a matter of foreign policy.” 115



  31. Phil

    Is BX better than T for a dividends

    How would you trade it ?

    As always thanks


  32. BX/QC – Well, they pay more dividends ($2.32 – 6.93%) than T ($2.04 – 6.62%) but "better has to include the risk factor and  I think T at $30.83 is less risky than BX at $34 as their earnings very much go up and down with the market.  T is underperforming now, which I call "cheaper" and note how T does not give you the highs or lows that BX gives you over time. 

    On the bright side though, BX is so volatile that you can sell 2021 $33 calls for $4.50 and 2021 $30 puts for $3.50, which knocks $8 (23.5%) off the entry price so net $26 and called away at $33 is $7 + $4.64 so $11.64 at $33 is 34.2% over two years.  

    Of course, you could blow off the dividend and just buy the $28 calls for $4.20, selling the same $8 put and call set for a net $3.80 credit on 2x (the same as you'd be assigned with 1x the stock and 1x the short puts) and then at $33 you make $13.80 without all that silly stock.  That's how I'd go.

    As we know from experience, it's a lot easier to roll and re-position a spread if the stock goes bad than a more standard covered share.  

    With T, the combination of their stability, the $30.83 stock and the 2021 $28 calls at $4.20 and the $30 puts at $4.15 knocks $8.15 off so net $22.68 makes $5.32 at $28 and $4.08 in dividends is $9.40, which is 41.44% at $30 and I sure don't mind owning T under $30 (see above chart) and we're talking an average of $26.32 if assigned.  







  33. Hello Guys.  Did anyone see a good reason why Retail seemed to sell off?  M, BBBY, LB?

    Thanks!



  34. If you have a large account with TDA ($800k+), you can call them to negotiate better money market sweep rates. They give you a few other options, one of which gets you close to 2%. I imagine they will negotiate margin interest rates, but I haven’t bothered, since I never borrow from them. 


  35. KHC   I just want to remind you that their CFO was just 29 and shortly out of MBA school when they hired him last year. 


  36. I was waiting on Phil’s answer on BX and T.
    On BX I run Phil’s stock buy with Jan 21 Strangle 33/30 I get 7.50 not 8$ as armchair play and receive a return of 1.52% per month or 34% over the 23 month till Jan 21 .
    Yes this is a relaxed income!
    However with a bit more work I would run my play every 3 month by selling the May 31/34 Strangle for 1.93 or a return of 2.59% per month. Doing a similar trade every 3 month would give a return of 23x 2.59 = 59%!
    Yes here my capital outlay is net 3,010.00 per 100 shares.
    Looking at Phil’s BCS play My Jan 21 28 call cost me 7.15 not 4.50 and selling the Jan 21 30/33 strangle gives me 7.55 so here only a credit of .40 cents. I might see this wrong but do not see a credit of 3.80
    Remember your 33 caller is at present always ITM and there is a possibility to be called any time the premium is less than the quarterly dividend.
    We do have a spread of 5$ which is over 100% ITM so if all goes well we would get 5$ plus .40 cents or better 540.00 per option play (100)! without a capital outlay.
    Looking at my 1.93 per every 3 month I would receive 1,483.00 obviously by spending 3,400.00 not discounting the first strangle.
    Phil’s BCS would give you a return of 540% no capital outlay.
    The armchair gives you, not discounting the first 3 month strangle, a return of 43.6 % over the full period.
    However you do have a stock credit of 3,400.00 if all goes well.
    On T again Phil sets up a 693 days armchair trade. For me a bit hard on the caller as he is nearly 3$ ITM, possible I would go for 30/30.
    Yesterday I did set up an armchair trade for a shorter month strangle, again will possible give you a better return over the same period.
    So lots of choices to let that spare cash work for you.







  37. Japan’s Hayabusa 2 successfully touches down on Ryugu asteroid



  38. is it Friday? ;-)


  39. Did Phil fall back to sleep?