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TGIF – Trade Talk (Again) Pops Us into the Weekend

Back to 2,800!

As you can see from the chart, S&P earnings are down about 1% since September but the S&P itself it up 1%, back to the critical 2,800 line (again) and we'll see if it sticks but the /ES Futures are a fantastic short below that line with very tight stops above.  What I find most interesting on this chart, however, is the "value" of the S&P 500 stocks now bushing $67Tn and I'll tell you why that is important.

You can look and look and look but you can't find a good number on the total Profit of US Corporations because they, and the Government, work very hard to obscure that information from the public.  Why?  Because if the public understood just how much money Corporate America was makin and how little they are paying in taxes – there would be lynchings – and NOT the kind the GOP like!

$67 TRILLION is a good clue about corportate profits because you know that the S&P is trading at roughly 22x forward earnings so, if the valuation is $67Tn, we divide that by 22 and find that profits must be $3.05Tn.  That makes sense becuase Apple alone makes $60Bn and they are about 2% of the S&P so 50 x $60Bn is $3Tn also.  Well that's settled then, JUST the 500 companies in the S&P 500 make $3Tn and figure $3Tn for the other 5,500 public companies is $6Tn and than whatever all the private companies (Cargill, Koch, Deloitte, Pricewaterhouse, Mars, Publix, Bechtel…) make has got to be at least another $2Tn so that's about $8Tn in PROFITS for our Corporate Masters and let's see what they paid in taxes last year:

 

$297Bn???  WTF???  That's just 1.5% of our GDP and Corporate Profits are 40% of our total GDP – they are barely paying 10% of their profits in taxes!  165M wage-earners making $50,000 a year get paid $8.25Tn – about the same as the corporations make in profits, yet they paid $1.6Tn in Income Taxes (20%) and another $1.2Tn (15%) in Payroll Taxes.  

Image result for us tax revenues 2018THESE are the "people" we gave $1.5Tn in tax breaks to?  It takes them 5 years to PAY $1.5Tn in taxes!  The American people (that's you!) had to BORROW $1.5Tn to finance tax breaks for Corporations who pay 1/10th as much tax as we pay.  Also, note on the chart that we, the people, paid $1.2Tn in Payroll taxes and Social Security only paid out $939Bn - yet the GOP tells you we have to cut that.  Medicare is another $600Bn and Medicaid almost $400Bn but they are fighting tooth and nail not to have Universal Health Care and get those costs under control (aside from all the money you have to pay out of pocket because the companies you work for no longer pay for health insurance).  

This is MADNESS people – we need to stop screaming about Socialism and start screaming about the perversion of Capitalism that is what is really destroying this country.  165M workers make $8.25Tn and pay $2.8Tn in taxes, leaving them with $5.45Tn (less state taxes) so about $33,000 each to spend while 165,000 people who own the Corporations make $8Tn and pay $300M in taxes, leaving them with $7.7Tn (less state taxes or rebate incentives) so about $46.66M each to spend.

Since Trump took office, Corporate tax revenues have dropped 60% – about $666Bn a year less paid out by our Corporate Masters and what have they done with the money?  NOTHING!!!  Very little investment, very little job creation, LOTS of buying back their own stock and inflating market prices which helps who?  The same 165,000 people who have $46.66M in disposable income – not the poor schmucks who have $33,000 and voted for this madness!  

Meanwhile, despite all the buybacks and despite all the tax breaks – the economy has been in steep decline for the past 16 months as we saw from yesterday's GDP Report and as we can see from this Macro Surprise Index, which is as low as it was in January of last year, when we had a 10% market correction.

Trump's current budget has us on a path to rack up $35 TRILLION in debt by 2030.  The $1.5Tn tax break we are giving Corportations multiplies through the years – as does the massive increases in Military Spending, etc.  Even if the country does prosper – we're not going to reap the benefits of increased Corporate Profits and the Corporations are not obligated to pay our nation's debts – they can just leave if they want to – as they often threaten to do – leaving the poor citizens who can't afford to shift their assets overseas to foot the bill:

Related image

This is the non-Socialist future you are being promised – a Capitalist's Debtor's Prison from which you and your family won't be able to escape – except maybe on a boat since most of the country will be underwater by then…  That's the bright side – other than the boat – there's nothing bright-looking about this future.  

So instead of screaming "Socialism" evey time someone suggests a solution – maybe let's consider that people like Bernie Sanders, Elizabeth Warren and Alexandria Ocasio-Cortez may actually have a point and we do need to RADICALLY rethink the way we are running this country – before we run it right off a cliff!  

“Unless you believe in fairies, that is not an economy that can function without inflationary instability.”  – Alan Greenspan, yesterday!  

“The long-term outlook is terrible. The short-term outlook is not too bad."

Not too bad!  

Have a great weekend, 

- Phil

 


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  1. Good morning!  

    Maybe this is why AOC isn't keen on giving out her address:

    Earlier this month,  Dave Kubal, president of  the Religious Right group Intercessors for America, explained how Rep. Ocasio-Cortez is connected to “a coven of witches that cast spells on President Trump 24 hours a day, seven days a week.”

    Immediately after interviewing conservative Christian congressman Jody Hice of Georgia during his monthly “prayer call,”  Kubal told his followers:

    It’s been widely publicized that there is a coven of witches that cast spells on President Trump 24 hours a day, seven days a week. This particular coven is found in the southern portion of New York City.

    So, right in the middle of all of this, the southern district, in the middle of where these witches are doing the 24/7 spell-casting, we find the territory of Alexandria Ocasio-Cortez.

    Kubal added:

    Her district is in the center of all of this going on. Is this a coincidence? 

    Image result for aoc witch

    This country just gets crazier and crazier.  

    Oh’ I see! Now that the 2 year Russian Collusion case has fallen apart, there was no Collusion except bye Crooked Hillary and the Democrats, they say, “gee, I have an idea, let’s look at Trump’s finances and every deal he has ever done. Let’s follow discredited Michael Cohen…..

    …and the fraudulent and dishonest statements he made on Wednesday. No way, it’s time to stop this corrupt and illegally brought Witch Hunt. Time to start looking at the other side where real crimes were committed. Republicans have been abused long enough. Must end now!

    And what???

    Great to be back from Vietnam, an amazing place. We had very substantive negotiations with Kim Jong Un – we know what they want and they know what we must have. Relationship very good, let’s see what happens!


  2. LOL – Actions do speak louder:


  3. 2,800 is a good shorting line for /ES, lined up with 26,075, 7,150 (another good line on /NQ) and 1,585, which is  a good line on /RTY.

    Oil testing $57 from above, /RB $1.75, /NGV19 is $2.92.


  4. Good Morning!


  5. How many times can they bring up the China deal? It seems to be each time they need to bump the market.


  6. A coven of witches and Mueller has not found them yet after 2 years!


  7. Great police work!  


  8. It's truly frightening how lying seems to come so easy to everybody in the Trump family, even down to Ivanka who pretended that no help was given for Jared's clearance. And you wonder why everybody around them is being indicted for lying. Meetings must be really productive at the company – you have to assume that everything being said is a lie.


  9. Radical is good… Embrace the uncertainty.  :)



  10. Short /NQ


  11. Only risking 10 pts.


  12. /NG taking off (cold front coming).  That was easy to call just by reading the weather report earlier this week:

    What Now Wednesday? Suddenly India and Pakistan are Shooting at Each Other!

    Meanwhile, this month is already over and Friday is March!  Spring is in the air though there's one of those nasty Arctic Blasts coming across the country next week as GLOBAL WARMING pushes warm air into the Arctic which then displaces an equal amount of cold air that normally stays in its place.  That's what these blasts are – a destablization of our Planet (Earth)'s entire weather system and you can see on the right-hand side of the chart how the same displacement is sending ridiculously hot air to Greenland.

    This is why we are still long on Coffee (/KCN19) Futures (see Monday's Morning Report) as it doesn't take much temperature variation to destroy fragile coffee plants.  So far, all the forecasts have been for great crops this year and the warehouses are already nearly full so there's a tremendous amount of short interest in the Futures and the market is ripe for a very nice squeeze if the weather changes the mood next week.  /KCN19 is the July Futures contract, now $101 and each $1 move in the Coffee price is $375 per contract (and it requires $2,970 of margin to trade a contract).  A good squeeze could easily pop the contracts back over $104 for a $1,000+ per contract gain – so worth playing over the weekend.

    /KCN19 is only $101.20 – so barely moving but /NG is flying but we got out of those already.  Still, that's the point, the premise was very likely to work out because we KNOW traders react to cold weather – at some point – so it made sense to buy the dip. 

    Wow, indexes flying up now – so much for shorting.

    Lying/StJ – What's really interesting is how obvious it is they are lying but how hard it is to PROVE they are lying (or lied with intent).  Trump family is old-school, like the Mob – they don't leave paper trails and they don't say what they mean directly and everything goes through middle-men who either take a bullet for them or get tossed under a bus if they get caught.


  13. Lying / Phil – Worse is the lack of shame. Caught in a lie, they simply push back to a point where you either give up or if you are weak minded, you start to doubt the truth!


  14. KHC time to buy the stock and sell the Jan 21 35 put.


  15. WIth you on /NQ again, Albo. It's the weak one today – in and out 3x for 7-10 points a pop. Holding one last one.


  16. /NQ – Sold 1 up 12.  Stops to entry on balance.


  17. /NQ -  I meant bought to cover.


  18. Terrible data but why should that bother the market?

    • December Personal Income and Outlays: Income +1.0% M/M +0.4% consensus, +0.2% prior.
    • Consumer spending -0.5% M/M vs. -0.3% consensus, +0.3% prior (revised).
    • Core PCE Price Index +0.2% M/M in-line with consensus, +0.2% prior.
    • January Income -0.1% M/M +0.3% consensus, +1.0% prior.

  19. Atitlan – Nice trading !   I'm not as agile as you are. 8-)


  20. I wish I was always agile like that – sometimes my expectations are right, the rest of the time I ether get stopped out my expectations are way too high. Covering the last scalp here. 


  21. I do have high expectations on an IYR short – shorted calls and long a few put spreads. Added it a few days ago and hoped to cover near the 200 dma. Looked crummy yesterday but is looking a little better here.

     Wanted to see Jabo saying "FU LB!!" yesterday, but look at that recovery today!


  22. Covered another 1/3 up 25 points.  Stops to 7140 on balance.


  23. Wheee!  

    2nd time is quite charming on the index shorts!  

    LB/Ati – I told you it wasn't that bad….

    That's why it needs to be a REFLEX to make those roll-down adjustments like we did in the LTP.  You are either going to give up on a stock or INVEST in a position that's more realistic than the one you had – the in-between move of not doing anything doesn't cut it!  


  24. Thanks for the LB advice yesterday Phil.  I got my $30/ $35 BCS adjusted to uncovered $22.5 !


  25. Wow, let's not make things too obvious:

    Everyone MUST watch the opening to – A Classic!

    I will be interviewed by at 9:00 P.M. on . Enjoy!

    That's right, it's wall to wall spin on Fox today!  

    Sen. Lindsey Graham on copy of Trump check and Stormy Daniels payments: "I've found most people don't write checks if they think they're involved in a crime."

     


  26. Most people don't write checks if they think that they will not be caught committing a crime. The same Lindsey Graham who claimed that even the whiff of impropriety by Clinton was enough for impeachment. 


  27. It looks like they released normal GE options again, and the stock is down almost 7% from where exited on Monday.  Should we re-enter, or wait?


  28. Is TOS acting wonky for anyone else?  A bunch of my positions are missing, P/L for the day is way off.  Etc.


  29. palotay – I have had that happen a few times. Check the date range on your "Monitor" tab. Second line from the top is the date range shown. You can click reset for the date range. Sometimes it gets hung up on a different day/year. 


  30. palotay

     

    TOS  ok  


  31. Ahhh.  That does explain it.  Thanks!


  32. GE/Palotay – I haven't found enough information on what the new company looks like, what the debt is, what the earnings potential is — don't like flying blind so I'd rather wait.

    TOS/Palotay – Nothing strange on my  screen but I have had it happen before. 

    Oil down to $56, /RB $1.72.

    Oh oh people of the earth

    Listen to the warning

    The prophet he said

    For soon the cold of night will fall

    Summoned by your own hand


  33. CHK up another 8%.

    Great call on that one, Phil !


  34. Bring Kudlow back on the TV to talk about China some more.


  35. Moved stops down to 7122 on last 1/3 of /NQ.


  36. Phil / EBAY – Elliott Management has one of the best records / reputations in the Bay Area relative to activist investing ( they were drivers behind MSFT )-  I think this may be a good opportunity.   They are close to getting a board seat.

    https://www.businesswire.com/news/home/20190122005513/en/Elliott-Management-Sends-Letter-Board-Directors-eBay

     

    Elliott Management Corporation (“Elliott”), which manages funds that beneficially own more than 4% of eBay Inc. (“eBay” or the “Company”), today released a letter outlining a significant value-creation opportunity at eBay. The letter, addressed to the Company’s Board, noted that the opportunity could lead to eBay being valued at $55-$63 per share, representing upside of more than 75% to 100% from today’s price.


  37. Thanks Albo, good job with the Nas stops.  Gotta take that money and run – especially into the weekend.

    EBAY/Batman – Well a chimpanzee could have turned MSFT around once they got Ballmer out but EBAY is a good company and doesn't need to steal your identity to make money but where was your enthusiasm back in Dec, when they were at $26?  Now up almost 50% you want to get in?

    $37.42 is $32.4Bn and they are dropping $3Bn to the bottom line but that's without paying taxes so I'd say $600M in taxes so we'll call earnings $2.4Bn so p/e is still nice at 13.5.  

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 2019E 2020E CAGR / Avg
    Revenue $m 8,257 8,790 8,592 9,298 9,927 10,746 10,858 11,514 +5.4%
    Operating Profit $m 2,454 2,476 2,197 2,325 2,431 2,222     -2.0%
    Net Profit $m 2,856 46.0 1,725 7,266 -1,017 2,530 2,343 2,514 -2.4%
    EPS Reported $ 1.57 -0.69 1.60 6.37 1.96 2.08     +5.8%
    EPS Normalised $ 1.57 -0.69 1.64 6.37 1.82 2.08 2.67 3.05 +5.8%
    EPS Growth % -21.6     +289 -71.5 +14.7 +27.9 +14.4  
    PE Ratio x           17.8 13.9 12.2  
    PEG x           0.64 0.97 1.10
    Profitability

    Not great growth but not no growth so 15x is very fair and 20x not out of the question so, I think I'd pay $30 and be happy so we can sell 10 EBAY 2021 $35 puts for $4.10 ($4,100) in the LTP and keep an eye on them but, if you like them, there's nothing wrong with the $32 ($9.15)/$42 ($4.40) bull call spread at $4.75 and 20 of those would be $9,500, netting you into the $20,000 spread for $5,400 with an upside of $14,600 (270%) and you're $10,000 in the money to start.  


  38. Phil when Batman asked for ebay, I looked at the graph and asked the same Question, now 50% up, like jumping on a running train.


  39. LABD (3x biotech bear ETF) at all time low.  Playing for a dead cat bounce @ 18.70.  Just looking for a scalp trade.


  40. albo/LABD

    I tried that a month ago and got SCALPED!


  41. Dclark – I know ! 

    Perhaps the cat is actually dead this time. :-)


  42. Caught a $9 up move in /ZW, good for $425 a contract. Maybe out too early. 


  43. albo/LABU

    I like the other side when it gets near 30.  I did a nice covered call when it was there last, but it didn’t last as long as I had hoped.  The last time it went that low, I played it for a year and did very well.  

    LABU Looks like it won’t have that much trouble getting back to its 200 ma. Which is why I don’t like LABD here.  In addition, it seems the interest to reduce drug cost has withered again.  


  44. Dclark -  Thanks.  All good points.

    I'll likely be out by the close.  Don't want to hold a spec like this over the weekend.


  45. LABD/Albo – You know, I hear so much cool stuff in Biotech, it's hard to bet against them.  Also, LABU not that high – it's just an inverse 3x ETF falls fast and hard when the inverse more than doubles. 

    Biotech is amazing!  Some of us are going to live a very, very long time…


  46. /KC pulls it out finally!  

    That's how I like to end my weeks!  


  47. Wait until some of us get to live a very long time but most do not.  The true inequality.  Sci-fi does a pretty good job on this.    I feel like this is a bad hundred year window.  Recognizing that healthy longevity may be possible but too late for us to take advantage.


  48. Giving up on LABD.


  49. Not me Tangled, I'm having everything replaced!  

    That's why they want to take away the death tax, so you can have yourself cloned and leave the money to yourself…

    "If you're under 40 reading this article, you're probably not going to die unless you get a nasty disease."

    Looks like we get another crack at shorting the 2,800 line.


  50. Phil// Any recommended trade on BIDU?  Thanks.


  51. Taking a spec position in CBL, a small Mall REIT.

    Bought stock at $2.

    Sold the Jan $2 put for .50 and the Jan $2 cal for .30.

    Cut its quarterly dividend from .20 to .075.  Currently yielding 15%, if reduced dividend holds. Latest dividend declared.  Goes ex'dividend later this month.

    From Briefing:

    CBL is a Mall REIT that has cut its dividend so it can reinvest in transforming space like former Sears boxes into Cheesecake Factories and Whole Foods stores.

    It will cost a lot, but if CBL is able to execute its strategy, then the stock has meaningful upside.

    Very speculative !


  52. I have Silver and ZB sort strangles. Is anybody knows why are these free falling in the last 2-3 days?

    Thanks


  53. BIDU/Rookie – Interesting that they haven't moved up with the China market. 

    IQ really flying, we used to play with them:

    A lot of China stocks got moved to global indexes and popped but BIDU already on Nas so I guess not affected.  

    Still, plenty of merit as they have good growth and nice profits.  $162.20 is $56Bn and they are making about $3.2Bn so well-valued but could easily go higher so I'd sell 5 of the 2021 $140 puts for $15.50 ($7,750) and buy 8 of the $150 ($39.50)/$180 ($26) bull call spreads for $13.50 ($10,800) so the net is $3,050 on the $24,000 spread that's $9,600 in the money to start.  

    CBL/Albo – Well every mall wants to do that – doesn't mean it will work.   CBL has 115 properties in 26 states – I don't think we need that many more Whole Foods and I very much doubt AMZN wants to stick them in malls.  CAKE is nowhere near big enough to fill a Sears space – PLAY is in my local Sears and using less than 20% of the footprint.  The reason I like SKT is because they never did rely on Big Box retailers so they don't have empty space issues – but they still got sold off with the rest of them.

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 2019E 2020E CAGR / Avg
    Revenue $m 384.8 418.6 439.4 465.8 488.2 494.7 482.3 442.4 +5.2%
    Operating Profit $m 127.7 118.7 144.5 151.3 125.1 108.6     -3.2%
    Net Profit $m 107.6 74.0 222.5 204 68.0 43.7 78.9 76.4 -16.5%
    EPS Reported $ 1.13 0.77 2.32 2.12 0.71 0.45     -16.6%
    EPS Normalised $ 1.14 0.85 1.05 2.06 1.02 0.99 0.91 0.92 -2.9%
    EPS Growth % +101.3 -25.2 +23.2 +95.7 -50.7 -2.7 -8.12 +0.91  
    PE Ratio x           21.9 23.8 23.6  
    PEG x           n/a 26.0 3.22
    Profitability

    SKT makes $75M and you can buy them for $2Bn and they pay 6.5% while you wait.  CBL lose $80M last year, will lose $20M this year (if all goes well) and over $130M in 2020 as they are forced to take write-downs unless their fantasy comes true.  Even at $2, they are asking $400M so you can share their pain but at least they are paying 10% (at 0.20) while you wait.

    Silver/Kgab – Dollar came back and the run was a bit overdone so pulling back.  

    I'm thrilled – thought I wasn't going to be able to get back in on /SI (but we still have WPM!)


  54. Phil – Thanks on CBL & SKT.

    CBL pays 15%.  .075 per quarter.  Down from .20.  Granted it's a speculation, but I like the price and the premiums in the options.  I also like the well defined risk.

    Certainly not a meaningful commitment dollar wise.


  55. XLU- Phil, any thoughts on shorting this ? Turned back twice at 57ish since 11/17. Up there again now. 

    My thought was selling June bear put spread 57/52 for 1.49; sell June 57 call for 1.50.


  56. Correction – that was buying the put spread; selling the calls


  57. XLU/Pstas – Well I think the whole sector has issues but they've already forgotten about them, apparently.  I don't have strong feelings one way or another though but I think it's a good percentage play.  

    Popping back a bit into the close.

    Have a great weekend, 

    - Phil


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