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Testy Tuesday – Trouble at 2,800 – Again!

You're welcome!  

In yesterday's PSW Morning Report (subscribe here) I said:

7,200 on the Nasdaq (/NQ is a good shorting line for today as is 1,590 on /RTY, since that's the 200 dma – tight stops above!

As you can see, the Nasdaq (/NQ) shorts were good for gains $2,000 for each Futures contract shorted while the Russell (/RTY) fell to 1,565 and that was good for gains of $1,500 per contract – not a bad way to start the week.  In case you are wondering – in our Live Member Chat Room, at 12:16, I also called the bottom, saying:

Hopefully that will be it, 2,780 though is a terrible fail of 2,800 and down 100 points on the Nas is a quick $2,000 and /RTY 1,568 should be support but, if not, could see 1,550.   Tight stops in any case but I'm happy with these gains! 

Keep in mind that we are Fundamental, not Technical Traders.  We call these tops and bottoms based mainly on the news cycle – even intra-day and the only Tecnical Indicator we follow is the 5% Rule™, which we invented to neatly summarize all the TA BS into one simple formula that FUNDAMENTALLY accounts for TA as a factor in our market calls.  Turns out, it also does TA better than any other system I've seen – but I still think TA is BS.

It doesn't matter if it's BS though, because – as long as millions of people follow something – it becomes a Fundamental factor anyway.  If crows flying east caused people to sell Apple, we'd be tracking crow migration as a Fundamental Indicator but not enough people trade on crows to make it relevant but enough people follow Elliot Wave, Ichimoku Clouds, Bollinger Bands, etc. to make it a signal we do pay attention to.  When we see the news flow coincide with support-resistance lines for Technical Traders – THAT is when we like to make our Futures calls.  

Meanwhile, the big call is WTF is going on with the S&P 500 at 2,800?  Yesterday was the 4th time since October we've been rejected at that line and, earlier last year, it failed on 4 other occasions so we're 1 for 9 crossing over 2,800 for more than two weeks in the last 52 weeks – that's NOT GOOD! 

As you can see, almost all the rejections sent us down 100-200 points so let's not get too bullish as all we got yesterday was a bounce off the fall from 2,820 on Monday to 2,770 yesterday so that's 50 points and that means, per the Fabulous 5% Rule™, that we can expect 10-point bounces to 2,780 (weak) and 2,790 (strong) so now we're watching 2,790 as the fail line and, if we can't hold that, we'll be back to 2,770 and likely on the way to a full 1.25% pullback from 2,800 to 2,765 and, failing that, the next stop is the 2.5% line at 2,730, which we last tested on 2/15.  

Notice how well the 5% Rule is being obeyed.  That also tells us that 2,835 is the 1.25% line but we haven't made that and we are finding resistance at the 0.625% line, which is 2,817.50.  We don't usually bother at that level but it is ineresting that that's exactly where we topped out yesteday, which indicates there is a LOT of technical resistance over 2,800 and it's going to take a lot more than promises of trade progress to get us over that hump. 

That's why we look for opportunities to go short at that line and not long.

Meanwhile, China has lowered their GDP target (6-6.5%) and instituted $300Bn in Tax Cuts to spur growth, which indicates that currently they are growing at less than 6% and feel they need Tax Cuts to get there.  China is also attempting to boost an already strong market because it too is run by Oligarchs who are extracting the wealth of the country to line their own pockets – who says we don't have a lot in common?

As in the US, the Chinese tax cuts will primarily boost Corporate Earnings and, as you can see from this chart, Corporate Debt in China is around 200% of their GDP and, if that ever hits the fan, there isn't enough Yuan in the World to fix the flood of defaults that will sweep across Asia and China knows this – and fears it. 

China's largest property developer, Evergrande, which is owned by China's 2nd richest person, Hui Ka Yan, announced they would be discounting their properties by 10% after home sales collapsed in January.  This is beginning to look like the US S&L Crisis under Bush the First as Evergrande recently sold $1.8Bn of 5-year notes for 13.75% based on the assumption that anything they bought would go up more than that in value.  Turns out the assumption was flawed…

Overall, Evergrande has $208Bn in liabilities, including $43Bn maturing this year and they can't keep borrowing at 13.75% to cover it (and Hui had to buy $1Bn worth of the notes himself because no one really wanted to lend Evergrande more money – even at that rate). The company's debt to equity ratio is roughly 400% and the equity is quickly losing value while the debt piles up.

The fact that China' largest property developer is now slashing prices across the board by as much as 10%, means that a deflationary hurricane is about to blow across what most see as the most important sector in China's economy, and worse, should other property developers follow in slashing prices launching a race to the bottom, nobody knows how far prices could truly fall should a liquidation domino effect ensue.  China has MASSIVELY overbuit homes and currently has a 22% vacancy rate – the most in the World.

And yes, that's right, 12% of the homes in the US are unoccupied – so don't believe your realtor when they tell you you'd better act fast!  That's 12M empty homes and we have 550,000 homeless people in this country.  Gosh, I wish there was some way to figure out a solution but I'm just stumped…

Be careful out there.  


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  1. As someone mentioned yesterday, 2800 is now a quadruple or more top… Even before the last summer run-up it has been resistance:

  2. : GNC shares shed premarket gains after earnings miss

    GNC Holdings Inc. shares (GNC) soared more than 3% in premarket trade before reversing those gains to trade down 3% Tuesday, after weaker-than-expected earnings offset news of a new venutre. The Pittsburgh, Pa.-based vitamin retail chain said it will receive about $176 million in a partnership with International Vitamin Corp. As part of the deal, GNC has agreed to integrate its manufacturing division with IVC through a joint venture. GNC will receive an aggregate $101 million in exchange for the net assets of the Nutra manufacturing plant and the Anderson facility and will retain an initial 43% in the venture. The company will receive an additional $75 million in the next four years based on the venture's performance as IVC's ownership stake rises to 100%. Separately, GNC said it had net income of $58.8 million, or 62 cents a share, in the fourth quarter, after a loss of $212.7 million, or $3.03 a share, in the year-earlier period, when it booked impairment charges. The company said it had an adjusted loss of 13 cents a share, compared with a FactSet consensus of EPS of 3 cents. Revenue fell to $547.9 million from $562.8 million, missing the FactSet consensus of $550.0 million. In February, the company completed the last tranche of the roughly $300 million investment by Harbin and used the proceeds to pay down debt and boost its capital position. "While fourth quarter operating results were below our expectations, we recently achieved some major milestones in repositioning the company," Chief Executive Ken Martindale said in a statement. Shares have fallen 24.4% in the last 12 months, while the S&P 500 has gained 2.6%. 

  3. Good Morning!

  4. KHC- interesting Buffet take on KHC troubles:

    “Heinz was started in 1869 and it has had all that time to develop various products, particularly ketchup, things like that. The Kraft part is a little murkier but it goes back to C.W. Post in 1895. Those companies have brought all kinds of brands out – you know them, you had them when you were a kid, and you have them now, some of them. They’ve been distributed worldwide through hundreds of thousands of outlets… they’ve spend a fortune on advertising. Their sales now are $26 billion. Costco introduced the Kirkland brand in 1992 (27 years ago) and that brand did $39 billion last year whereas all the Kraft and Heinz brands did $26 billion. Here they are, a hundred years plus, tons of advertising, built into people’s habits and everything else, and now Kirkland, a private label brand, comes along and with only 750 or so outlets and does 50% more business than all of the Kraft Heinz brands. So, house brands, private label, is getting stronger… and it’s going to keep getting bigger.

  5. Gee, two homes for every homeless person…hmmm…what to do?…. :(

  6. ADU's – A great opportunity for our existing housing crisis here in California.

  7. Good morning! 

    Our new PSWI project, Hemp Boca, is going to get a syndicated radio show and I have a meeting at the station later so I'll be gone from roughly 11-1:30 – hopefully the market doesn't collapse while I'm gone.  The show will be 2:30-3:30 Tuesdays starting in April and I'll be a guest once in a while to discuss MJ Investing for public companies – I'll let you know more as it develops.  

    Big Chart – No major breakdown yet but /ES 2,789 is right on the strong bounce line and 7,150 on /NQ and 25,800 on /YM and 1,780 on /RTY are the lines we need to see taken back this morning to relive the selling pressure. 

    LB/DC – I love that logic that companies are worth more apart.  Still, thank God for speculators! 

    GNC/Jabob – That's a big shed!  

    Not in the LTP but OOP has a position:

    Short Put 2020 17-JAN 5.00 PUT [GNC @ $3.05 $-0.21] -10 1/18/2018 (318) $-2,500 $2.50 $-0.25 $2.50     $2.25 - $250 10.0% $-2,250
    Long Call 2021 15-JAN 2.50 CALL [GNC @ $3.05 $-0.21] 100 12/26/2018 (682) $10,000 $1.00 $0.45     $1.45 - $4,500 45.0% $14,500
    Short Call 2021 15-JAN 5.00 CALL [GNC @ $3.05 $-0.21] -100 12/26/2018 (682) $-5,000 $0.50 $0.20     $0.70 $-0.00 $-2,000 -40.0% $-7,000

    I doubt this will move the needle enough to bother us.  We only sold 10 puts and we're in for net $2,500 and $3 pays $5,000 on the spread and we'd owe $2,000 back on the puts so net $3,000 means we're profitable at $3 and everything else is gravy.  Way too early to worry about a long-term turnaround strategy.  

    House brands/Pstas – COST is amazing with that Kirkland stuff – good quality, low prices – a winning combo.  I think companies like KHC should open an Amazon store and sell direct for less.   They don't want to compete with their grocery stores but they are getting killed and they should do something now – while the names still have value.  

    Also, their lack of advertising is what's killing them and that's Buffett's (and 3G Capital's) fault for running an austerity program that squandered all the goodwill they built up over 100 years.  You can't coast on your name.  Heinz used to have Carly Simon singing their jingles and now my kids don't see any difference between Heinz and Kirkland – they are both "just ketchup".  

    2 Homes/1020 – Actually it's 24 empty homes for each homeless person!   Detroit alone has 70,000 abandoned buildings and 31,000 empty houses - I would love to do a social experiment where we offer homeless people in NY homes in Detroit for free with no other assistance other than running water and no property taxes on the home and see what they do with it.  

    ADUs very interesting.  Probably a good investing opportunity in some areas – wish I had time!  

  8. OK – so I jumped in on CVS after the initial drop around 64.  It has kept falling like a rock on no additional news that I can find.  Any thoughts or opinions on a future outlook? 

  9. Phil – Thanks for the math help :) …ADU's will be especially helpful in coastal California.

  10. CVS/Jeff – As you know, I'm a WBA guy.  The bottom line is CVS overpaid for Omnicare and they haven't even proven Aetna was worthwhile yet and they had to lower their 2019 estimates and had to take Goodwill write-offs on their acquisitions already.  As I often say, it's very hard to get a handle on post merger-companies and this first combines Aetna report makes it hard to justify $70Bn ($55) after losing $600M in 2018 and now guiding down in 2019 but, in the long run, they should earn closer to $10Bn than $7Bn – so it's a patience game but they are about where ($50) I find them compelling for the LTP – you were just a bit early.  

    See you later guys!  

  11. There’s probably another planet in our solar system

  12. McConnell: Enough Senate votes to reject Trump’s wall move

  13. Someone bought 200,000 puts on GE last week. Hmmm.

  14. Probably a coincidence Soma!

  15. Jefl/CVS    If its any consolation, today someone bought 12,400 Jan21 $90 calls and recently there were 60,000 $100 calls bought.  Some are thinking this signals a bottom and are taking a longer term view.  Similar to what Phil said.

  16. Well, looks like I didn't miss anything.

    GE/Jabob – That's why we got out – never trust those spin-off deals.

    GE/Soma – Yeah, who was that?

    Not enough volume to move the needle today.

    Date Open High Low Close* Adj Close** Volume
    Mar 05, 2019 279.54 279.68 278.41 279.30 279.30 33,041,823
    Mar 04, 2019 281.60 281.87 276.84 279.40 279.40 106,323,900
    Mar 01, 2019 280.44 280.88 278.82 280.42 280.42 78,880,500
    Feb 28, 2019 278.96 279.45 278.32 278.68 278.68 69,268,300
    Feb 27, 2019 278.52 279.59 277.48 279.20 279.20 56,921,600
    Feb 26, 2019 279.13 280.30 278.90 279.32 279.32 56,844,100
    Feb 25, 2019 280.73 281.31 279.43 279.52 279.52 69,030,700
    Feb 22, 2019 278.11 279.36 277.40 279.14 279.14 78,114,600
    Feb 21, 2019 277.70 278.10 276.35 277.42 277.42 64,214,700
    Feb 20, 2019 277.81 278.92 277.25 278.41 278.41 76,610,800
    Feb 19, 2019 276.48 278.58 276.47 277.85 277.85 59,120,800

  17. CVS – Since we can sell 5 of the 2021 $50 puts for $6.40 ($3,200), there's no reason not to do that in the LTP as it's just risking a net $43.60 entry (20.7% off) and it will remind us to keep an eye on them.

    • U.S. credit card balances rose by $26B during the last quarter of 2018 to hit a record $870B as of December and "marks the first time credit card balances re-touched the 2008 nominal peak," according to a Federal Reserve report.
    • Almost 480M credit cards are in circulation, up by more than 100M since its trough after the 2008 recession.
    • Of those cards, about 37M accounts, holding ~$68B in debt, were 90+ days delinquent during the quarter, up about 2M from Q4 2017.
    • Credit-card related tickers: VMAAXPDFS
    • ETFs: IPAY
    • U.S. stocks fluctuate in afternoon trading with the three major stock averages up, down, and flat
    • Nasdaq creeps up 0.1%, while the S&P 500 (-0.1%) dips into red territory and Nasdaq is essentially flat.
    • Only 3 of the 11 S&P 500 industry sectors are in positive territory--communications services (+0.4%), consumer discretionary (+0.3%), and real estate (+0.3%).
    • Energy (-0.5%) and financials (-0.4%) create the most drag on the markets.
    • Target (+4.8%) rises on strong Q4 earnings and guidance, as does Delta Airlines (+2.4%) after reaffirming profit forecast.
    • On the downside, General Electric -5.9% after CEO sees negative industrial free cash flow, and Aon -3.6% news that it's considering making an offer for Willis Towers Watson (+8.2%).
    • The good news: U.S. household debt and U.S. financial corporate debt have declinedsignificantly from the 2008 financial crisis, writes Dallas Fed President Robert Kaplan in an economic essay.
    • The bad news: U.S. government debt and nonfinancial corporate debt is trending up; in fact, U.S. nonfinancial corporate debt, as a percentage of GDP, is now higher than its previous peak at the end of 2008.
    • "An elevated level of corporate debt, along with the high level of U.S. government debt, is likely to mean that the U.S. economy is much more interest rate sensitive than it has been historically," Kaplan wrote.
    • Also the higher government debt means there's less ability to spend on infrastructure and other investments and reduced capacity for fiscal stimulus during the next economic downturn.
    • As for the rise in nonfinancial corporate debt, Kaplan points to the growth in BBB-rated debt, which could fall to junk status if their credit rating weakens more, as a risk.
    • "If this deterioration were sufficiently widespread, credit spreads would likely widen in order to compensate lenders/bondholders for greater risk," Kaplan writes.
    • That widening would likely indicate tighter financial conditions "that could, in turn, lead to a more significant slowing in the economy."
    • Chain store sales increased 4.2% for the week ending on March 2 in a deceleration from last week's pace of +5.2%, according to Johnson Redbook.
    • Sales in March are expected to increase 5.0%.
    • Retailers report that spring apparel is moving at full price in warmer parts of the country.

    • U.S. investors have filed a suit against Bank of America (BAC -0.3%) and Royal Bank of Scotland (RBS -2.2%) for their alleged roles in conspiring, along with six other banks, to fix prices in the $9.4T European government bond market, Reuters reports.
    • The suit, which seeks class-action status, says the banks violated federal antitrust law.
    • The complaint alleges that banks profited at the expense of investors by agreeing to widen bid-asked spreads they quoted, an action that increases the prices that investors paid for the bonds while lowering the prices at which they were sold.
    • On January 31, the European Union's antitrust authority accused eight unnamed banks of being part of a group that distorted bond prices from 2007 to 2012.
    • Previously: RBS probed in EU bond cartel probe (Feb. 14)

    Chevron ramps up Permain production outlook to 900K boe/day by 2023

    • Chevron (NYSE:CVX) says it expects 3%-4% compound annual production growth through 2023 and annual capital spending of $19B-$22B during 2021-23.
    • CVX says its outlook is supported by strong performance in the Permian Basin, where the company expects production to reach 600K boe/day by year-end 2020 and 900K boe/day by the end of 2023, a nearly 40% increase from its previous forecast.
    • "The race doesn’t go to the one who gets out of the starting blocks the fastest," CEO Mike Wirth says, referring to its upgraded Permian outlook. "The race goes to the one who steadily builds the strongest machine."
    • CVX also expects $30B of cash generation at $60/bbl Brent oil in 2019 to be used to fund its 6% annual dividend increase, a ratable and high-return capital program, and $4B of expected share repurchases.
    • Exxon Mobil (NYSE:XOM) revises its Permian Basin growth plans to produce more than 1M boe/day by as early as 2024, a nearly 80% increase from its previous outlook.
    • The target is 5x as much as XOM now produces in the Permian Basin, where the company has 1.6M acres.
    • XOM, which holds its analyst day tomorrow, says the size of its resource base in the Permian totals ~10B boe and likely will continue to grow as analysis and development activities continue.
    • XOM says it has 48 drilling rigs currently in operation in the Permian with plans to increase its rig count to ~55 by the end of this year.
    • Cheniere Energy (LNG +1.2%) is in talks with China's Sinopec (SNP -0.6%) for a new long-term liquefied natural gas supply agreement and the parties are awaiting further instructions from government authorities, an unnamed Beijing-based Cheniere executive told S&P Global Platts.
    • The executive said Cheniere has been in talks with SNP "for some time" but declined to provide further details on the size of the new deal and which government was holding back on approvals, according to the report.
    • Cheniere is expected to sign an $18B supply deal that could be announced as part of a broader U.S.-China trade deal at a summit at the end of March, WSJ reported earlier.
    • Before the start of the U.S.-China trade war, Cheniere announced two LNG sale and purchase agreements with CNPC in February 2018 in which CNPC's PetroChina would buy 1.2M mt/year of LNG, with a portion of the supply beginning in 2018 and the balance starting in 2023.
    • Newmont Mining (NEM +0.4%) CEO Gary Goldberg says he will meet later today with Barrick Gold (GOLD -0.4%) CEO Mark Bristow in New York to talk through their differences, but Goldberg tells Bloomberg that he will focus on NEM's proposal for a joint venture around the two companies' assets in Nevada.
    • NEM's board rejected Barrick's no-premium offer yesterday, saying its shareholders would be better off completing a pending purchase of Goldcorp (GG +1%), but Goldberg also offered a concession, saying his company would be willing to negotiate a friendly joint venture with Barrick at their Nevada operations that would give Barrick the greater share while NEM pushes ahead with its Goldcorp deal.
    • But to reach any sort of deal, the companies would have to set aside an explosion of nasty comments from the past week; in a slide presentation yesterday, NEM said that since Chairman John Thornton arrived at Barrick, the later has underperformed NEM by more than $12B "while pocketing over $65M from Barrick shareholders," and while Bristow "has been successful as an explorer and a geologist… as an operator, he has not created shareholder value and he has yet to prove that he can successfully manage or integrate a global portfolio."
    • Top Barrick Gold (GOLD -0.6%) shareholder VanEck says it prefers a joint venture with Newmont Mining (NEM) rather than a full acquisition, adding another obstacle to Barrick's ambitions to buy its closest rival.
    • Joe Foster, who runs the VanEck International Investors Gold Fund and is a major shareholder in NEM as well, says since the cost savings of any tie-up are concentrated in the two firms’ Nevada operations, the pair should focus on a joint venture of those assets; the fund holds 3.9% of Barrick shares and 5.86% of NEM shares.
    • "Nevada is a sure thing," Foster tells WSJ. "I don’t know if Newmont-Barrick makes sense."
    • VanEck’s shareholdings in the two companies are not enough to stop a deal, but the fund’s preference for a JV could add pressure on both sides to engage in such discussions, which may be starting today with a meeting of the two CEOs.
    • Vale (NYSE:VALEfired an inspection firm because the company refused to certify one of its tailings dams as safe before the barrier burst and killed hundreds in January, prosecutors said in a document filed this week that explained why they wanted top Vale executives ousted.
    • According to the prosecutors, Vale said it would no longer ask auditor Tractebel to perform regular inspections of the dam; Germany’s TÜV SÜD then signed off on the dam that burst, despite evidence from its own readings that the structure was “way below” the recommended safety level.
    • The prosecutors allege it was a “recurrent practice” at Vale to pressure inspectors to sign off on reviews even if they “violated the required technical specifications.”
    • The allegations were contained in a document given to Vale last Friday recommending the removal of then CEO Fabio Schvartsman as well as Ferrous Metals Chief Peter Poppinga and other executives.
    • "Aurora Cannabis (NYSE:ACB) is well positioned to benefit in the early innings of the Canadian adult use market, given its impressive 20% market share to date," says analyst Vivien Azer.
    • She takes note of the company's large cultivation footprint as helping to "weather early storms in adult use while continuing to grow higher-value revenues in the medical market." There's also geographic diversity providing a "distinct advantage in growing its global footprint."
    • ACB replaces Canopy Growth (NYSE:CGC) atop Cowen's favorites. On a year-over-year basis, CGC is higher by nearly 90%, while Aurora is lower by nearly 20%.
    • Azer also starts coverage on Cronos Group (NASDAQ:CRON), but it rates just a Market Perform thanks to the perky valuation.
    • ACB is up 2.8% in premarket action.

    • General Electric (GE -4.2%) sinks after CEO Larry Culp said the company expects to see negative cash flow in 2019 from its industrial business, mainly due to ongoing weakness in its power unit.
    • "This is a multiyear turnaround in power," Culp said. "I don't want to sugarcoat that in any way, shape or form."
    • GE also sees organic revenue increasing in the low-to-middle single digits in 2019.
    • Culp's comments were made during a presentation at J.P. Morgan’s Aviation, Transportation & Industrials conference.
    • Southwest Airlines (LUV -0.4%) CEO Gary Kelly presented today at the JPMorgan Aviation, Transportation and Industrials Conference.
    • Kelly stated that the company expects to add 500 more Boeing 737s to its fleet as it plans on more expansion in North America and South America.
    • He also reiterated that the mechanics union turmoil is costing Southwest millions of dollars a week due to the extra delays and cancellations.
    • On a positive note, Kelly expects the Hawaii initiative to be a big draw for the airline in attracting new customers.
    • Southwest Airlines conference webcast
    • Southwest trades about 17% below its 52-week high of $64.02 from last September.
    • Tesla (TSLA -3.9%) has worked out a solution with Chinese customs authorities to clear imported cars, sources tell Reuters.
    • The reported issue with Model 3s coming into Shanghai appears to have been a contributing factor in today's share price decline.
    • Previously: Chinese customs holding up some Model 3s (March 5)
    • Barclays shifts into reverse again on Tesla (NASDAQ:TSLA), taking its price target on the EV automaker to $192 from $210.
    • "Much of the bull narrative has rested on Tesla being the next Apple, selling high-volume EVs at premium price point and at high gross margins, in part aided by a unique branded retail presence – a narrative we see as undermined by the recent price cuts and closing of most of the stores," warns analyst Brian Johnson.
    • Johnson and team see the sooner than anticipated announcement of a $35K Model 3 reflecting the need to replenish cash after the convertible repayment, perhaps exacerbated by the weak first two months of U.S. sales.
    • Barclays isn't the first to point out the painful impact on margins of the cheaper Model 3 in comparison to some of the high-flying expectations of the past.
    • Shares of Tesla are down 1.59% in premarket action to $280.63.
    • Papa John's International (NASDAQ:PZZA) is on watch after the company strikes a settlement deal with ex-CEO John Schnatter.
    • Under the terms of the deal, Schnatter will help the company identify a mutually acceptable independent director before resigning as a member of the board.
    • Schnatter will also dismiss his lawsuit against the pizza chain.
    • Analysts have been calling for a clean break between Papa John's and Schnatter.
    • Planet Fitness (PLNT +2.7%) and Kohl's (KSS +7.2%) announce a new strategic collaboration.
    • The companies plan to initially open up to 10 Planet Fitness stores this year adjacent to select Kohl's stores in the U.S.
    • Planet Fitness will leverage approximately 20K to 25K square feet adjacent to each of the select Kohl's stores in an effort to drive new and complementary traffic to these locations.
    • The program could be expanded in the future.
    • Source: Press Release
    • Transactions growth underpinned the big quarter for Target (TGT +3.7%) and helped to spark today's rally.
    • Overall transactions were up 5.3% in Q4 on top of 3.6% growth last year during the holiday quarter. The average transaction amount was 0.8% higher.
    • Target CEO Brian Cornell was on CNBC this morning to discuss what's going right for the retailer.
    • Cornell: "Our new small formats in places like New York are being well received. The investments in our own brands are driving market share gains in many important categories. But I think importantly the investments we made in fulfillment are connecting with the consumer. They're taking advantage of ordering online and picking up in store. They're driving into our parking lots. There are ship shoppers now taking advantage of same-day delivery. So, all of those elements are coming together."
    • Previously: Target +3% after strong holiday quarter comp (March 5)
    • Barnes & Noble Education (NYSE:BNED) is down 29.8% after the company drops full-year guidance following a weaker-than-anticipated Q3 earnings report.
    • The company now sees full-year revenue of $2.15B to $2.20B vs. $2.2B to $2.3B prior.
    • "The acceleration from physical textbooks to digital offerings contributed to somewhat higher than expected declines in revenue and EBITDA at BNC and MBS," observes Barnes & Noble Education CEO Michael Husbey on the quarter.
    • The company is accelerating its digital platform in response.
    • Previously: Barnes & Noble Education reports Q3 results (March 5)
    • John Wiley & Sons (JW.A -9.9%JW.B -2.1%) has slipped out of today's open after missing profit expectations with its fiscal Q3 report.
    • Revenue dropped 1% on a GAAP basis and operating income fell 23%.
    • In constant currency, adjusted revenue ticked up 1% and operating income dropped 21%.
    • Revenue growth in Research (1%) and Solutions (25%) were offset by a drop in Publishing (-14%).
    • In Publishing, Education Publishing fell 23% and STM and Professional Publishing fell 20%. Meanwhile Test Preparation and Certification rose 23% and WileyPLUS rose 7%.
    • For 2019, it's trimming guidance for cash from operations, which it now expects to decline in the mid-teens (vs. previous guidance for a high-single-digit drop). It continues to expect flat revenues and a mid-single-digit decline in adjusted EPS.
    • Conference call to come at 10 a.m. ET.
    • Previously: John Wiley & Sons misses by $0.17, beats on revenue (Mar. 05 2019)
    • Press release
    • Intel (NASDAQ:INTC) has another major security issue on its hands, according to The Registerciting a new research paper from the Worcester Polytechnic Institute and the University of Lübeck.
    • Intel CPUs back to the first-gen Core CPUs have a shortcoming that can be exploited through a foothold like malicious JavaScript in a browser or system malware. The attacker can then access passwords, keys, and other data from the memory.
    • The new route exploits the same speculative execution process that enabled last year's Spectre vulnerabilities. Speculative execution lets a process work on future tasks that could be needed while waiting for other computations to finish.
    • The researchers didn't find similar behavior in Arm and AMD (AMD -0.3%) processor cores.
    • Researchers are calling the new vulnerability SPOILER. The experts say Intel can't use software mitigation to fully fix the exploits. One author says he doesn't expect Intel to patch the issue within the next five years.
    • Susquehanna says Western Digital (NYSE:WDC) and Micron (NASDAQ:MU) could face a headwind from DRAM and NAND chip prices that are "tracking below prior expectations."
    • Analyst Mehdi Hosseini: "Even with a more moderate ASP decline in 2H19, margins are not expected to dramatically rebound due to excess inventory accumulated in 1H19 as well as flattening of the cost curves."
    • The firm expects Micron's outlook "to fall well short of the consensus" when it reports Q2 results on March 20. Mic
    • Susquehanna maintains Neutral ratings on both and raises Micron's PT from $33 to $35 and WDC's from $40 to $44.
    • Related news: DRAMeXchange expects Q1 contract prices to drop nearly 30%, worse than the prior 25% outlook and the highest single-season decline since 2011.
    • Micron shares are down 1.7% to $40.36 while WDC drops 2.3% to $51.40.

    Edward Jones cuts CenturyLink to Sell after 10-K delay

    • CenturyLink (NYSE:CTL) is lower for the third straight day, down 1.8%, amid a downgrade to Sell by Edward Jones.
    • That follows the company's move to delay its 10-K filing as it looks to sort out material weaknesses. Analysts have slashed target prices on the stock over the past few months.
    • Looking at the delay, SA contributor Michael Boyd writes that while the company doesn't expect a material change to financials, the sell-off is coming as investors begin feeling that the team Jeff Storey brought in from Level 3 doesn't have a "proper handle" on the business.
    • Issues with fair value measurement of the Level 3 assets are surprising, Boyd says, since the acquisition closed in November 2017 and KPMG remains the hired auditor.

    Apple led Q4 wearables sales

    • The global wearables market grew 31% in Q4 to 59.3M units, according to IDC data.
    • Shipments for CY18 were up 28% to 172.2M.
    • Smartwatches accounted for 34% of the market and units were up 55% in Q4. Wristbands held a 30% share while ear-worn devices gained 66% to a 22% share.
    • Vendors: Apple (AAPL -0.2%) led with 16.2M devices, 10.4M of which were Watches.; Xiaomi took second with a 13% share; Huawei's wearables jumped 249% due to bundling the devices with phones; Fitbit (FIT) returned to growth with a 3% gain; Samsung (OTC:SSNNF,OTC:SSNLF) gained 106% Y/Y to take fifth place with a 7% market share.
    • Apple (NASDAQ:AAPLreportedly purchased the patent portfolio of defunct AI security camera company Lighthouse late last year.
    • The acquired patents largely deal with computer vision scanning and recognizing faces, which is a similar concept to the Face ID in the iPhone XS and XR devices. But Lighthouse's facial recognition tech was considered among the most advanced in the industry, so Apple could use the patents to improve Face ID.
    • In other news that could lead to iPhone advancements, glass supplier Corning (NYSE:GLW) says it's testing flexible glass that's 0.1mm thick and can fold to a 5mm radius.
    • The recently unveiled Samsung Galaxy Fold and Huawei Mate X have plastic polymer displays.
    • In 2017, Apple pledged $200M in funding for Corning to support R&D, capital equipment, and glass processing.

  18. Wow! That credit card debt is $2600 for every man, woman, and child in the country.

  19. Syndicated radio show? who listens to radio anymore? Do a podcast or record the show and release as a podcast as well!

  20. Radio/CRS – Yes, it's also a podcast, of course.  There were more cameras than microphones.  100,000 live listeners though is not bad but mostly it's the chance to show up at almost ever major event in South Florida as well as other markets they are in – grass roots promotions!  

    • Walt Disney (DIS -0.3%) has selected a Warner Bros. veteran to lead the combined TV operations at Disney Television Studios once its $71B deal for Fox assets closes.
    • Craig Hunegs will be president of the division, with oversight of all operations, including ABC Studios, ABC Signature, Twentieth Century Fox Television and Fox 21 TV studios.
    • He'll report to Dana Walden, currently chairman/CEO of Fox Television Group who will be chairman of Disney Television Studios and ABC Entertainment.
    • Hunegs most recently ran Warner Bros. Digital Networks (as its founding president) and Warner Bros. Television Group's business and strategy.
    • Amazon (AMZN +0.5%) is in talks with Mexico's central bank to help launch a new government-backed mobile payment system that would let shoppers pay with a QR code, according to a Reuters report.
    • The CoDi payment system built by Banco de México will let users make online and in-person payments through a smartphone without an additional charge. A pilot of the system is expected later this month.
    • More than half of Mexico's population doesn't have a bank account, which helps explain why online sales only accounted for 4% of retail sales last year.
    • Amazon and local rival MercadoLibre (MELI +0.7%) have approached the bank about adopting the system.
    • Minnesota Gov. Walz introduces a proposal that would require the state's electricity providers including Xcel Energy (XEL -0.3%) to shift to 100% carbon-free energy by 2050.
    • State lawmakers recently introduced a similar measure that would mandate companies to reach a series of benchmarks before relying solely on clean energy, but Walz's proposal would require companies to reach clean energy by 2050 but not certain benchmarks beforehand.
    • The legislators' bill also would require XEL to go carbon-free by 2045, while Walz's proposal does not include that stipulation.
    • XEL, Minnesota's largest energy provider, already set its own goal of using carbon-free power by 2050, relying mostly on nuclear power to meet the goal, but it raised concerns about the proposal by state lawmakers in a hearing last month.
    • FDA Commissioner Scott Gottlieb, M.D., who, by most accounts, was doing a bang-up job revitalizing the agency, has resigned (effective in about a month) to spend more time with his family. He continued to live in Westport, CT with his wife and three children while commuting to Washington, DC.
    • His departure could stall his tobacco and e-cigarettes initiatives considering the White House's anti-regulatory stance, although President Trump liked the Commissioner and did not want to see him leave.
    • Biotechs are under modest pressure on the news.
    • Philip Morris International (PM -0.4%) and Altria (MO +0.8%) have moved higher off a report that FDA Commissioner Doug Gottlieb has stepped down from his position.
    • Gottlieb has taken a very tough stance on youth cigarette and e-cigarette usage.
    • Previously: FDA's Gottlieb quits (March 5)

    • Wall Street, the epitome of the conservative button-down dress code, may be loosening up a little, on occasion.
    • In an internal memo, Goldman Sachs (GS -0.1%) says it's moving to a "firmwide flexible dress code" when appropriate.
    • However, it's not to become an everyday thing.
    • "We want all of our clients to feel comfortable with and confident in our team, so please dress in a manner that is consistent with your clients' expectations," the memo read.
    • "Of course, casual dress is not appropriate every day and for every interaction," wrote Goldman's chairman, president, and CFO in an internal memo.
    • Chesapeake Energy (CHK -0.5%) may be headed for its first loss in five sessions since reporting stronger than expected Q4 earnings, as MKM Partners analyst John Gerdes reiterates his Neutral rating and $3 price target on CHK, saying the stock trades at a nearly 20% premium to its peers.
    • If CHK maintains a four-rig program, the WildHorse Resource addition will be NPV-neutral, with the asset’s higher capital intensity offsetting higher margins, Gerdes says.
    • While CHK’s capital intensity is competitive, its full-cycle return of ~90% is significantly short of the industry’s average cash recycle ratio of 120%, due to the company’s lower cash margin, according to Gerdes.

  21. Phil/WBA

    The trade in the LTP needs help.  (40) $70 long calls (14.88) against (20) $85 short calls.  The stock got hammered, like CVS.  The long calls are now (6.70) and short calls (2.8).  

  22. WBA/DC – Yikes, that's ugly and we were aggressively long too.  

    Long Call 2021 15-JAN 70.00 CALL [WBA @ $63.76 $-0.98] 40 10/22/2018 (682) $59,400 $14.85 $-7.60 $8.10     $7.25 $-0.03 $-30,400 -51.2% $29,000
    Short Call 2021 15-JAN 85.00 CALL [WBA @ $63.76 $-0.98] -20 10/22/2018 (682) $-15,000 $7.50 $-4.34     $3.16 - $8,680 57.9% $-6,320

    In the OOP, we had a full cover, so not much damage:

    Long Call 2021 15-JAN 60.00 CALL [WBA @ $63.44 $-1.30] 20 12/27/2018 (682) $27,600 $13.80 $-2.70 $13.80     $11.10 $-0.40 $-5,400 -19.6% $22,200
    Short Call 2021 15-JAN 72.50 CALL [WBA @ $63.44 $-1.30] -20 12/27/2018 (682) $-16,200 $8.10 $-2.13     $5.98 $-0.04 $4,250 26.2% $-11,950
    Short Put 2021 15-JAN 55.00 PUT [WBA @ $63.44 $-1.30] -10 12/26/2018 (682) $-5,150 $5.15 $0.15     $5.30 $0.30 $-150 -2.9% $-5,300

    They are down on fear of the Government cracking down on Pharma profits, nothing more.  We came in in Dec at $65 in the OOP so this is nothing so far but we'll keep an eye out.  

    In the LTP, we bought back 1/2 the short calls for $5.50 (up $4,000) and that hasn't worked so what we have now is net $40,400 or $10 per $70 call (now $6.70) and we can roll the 40 2021 $70s ($6.70) to 40 2021 $60s at $11 for $4.30 ($17,200) and roll the 20 short $85s at $3 ($6,000) to 20 July $67.50s at $2.30 for 0.70 ($1,400) and see if they bounce or if we have to roll again.  That puts us in 40 of the 2021 $60 calls for net net $59,000 so our break-even is about $75 though, eventually, we'll sell some 2021 calls to drop that below $40,000 ($70 break-even).  Not an emergency though so we'll wait to see what happens. 

    Not a pretty finish, dribbling out flat mostly.  

  23. Trump’s International Ratings Remain Low, Especially Among Key Allies

  24. The Age Gap in Religion Around the World

  25. China says new law will bar demands for technology handover

  26. Britain urged to reject ‘backward’ US food safety standards

  27. Good morning! 

    We're still flatlining on no partiuclar news – good day to take off but we do have the Beige Book at 2pm (and a webinar).

    • The global economy will continue to weaken this year, according to the OECD, weighed down by trade disputes and uncertainty over Brexit.
    • The interim outlook report showed GDP growth averaging around 3.3% in 2019, down from the 3.5% seen in the OECD's last forecast in November (which was already cut from 3.7%).
    • "A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets," said Laurence Boone, the OECD's chief economist.
    • Australia reported lower than expected growth last year as it battled a steep housing downturn, lackluster consumer spending and trade challenges with slower growth in China.
    • Annual GDP expanded 2.3%, the slowest since mid-2017 and below expectations for a 2.5% increase.
    • The Australian dollar fell as much as 0.8% against the greenback to $0.7026 on the news, its lowest level since early January.
    • Italy plans to sign a memorandum of understanding to become a part of China’s Belt and Road Initiative by the end of March, marking the first endorsement by a G7 nation, FT reports.
    • Tensions? The support would likely undercut U.S. pressure on China over trade and undermine Brussels' efforts to overcome divisions within the EU over the best approach to deal with Chinese investments.

    • MBA Mortgage Applications
    • Composite Index: -2.5% (W/W) vs. +5.3.
    • Purchase Index: -3% vs. +6%.
    • Refinance Index: -2% vs. +5%.
    • 30 year mortgage rate at 4.67% vs. 4.65%.
    • KFC and Pizza Hut's owner in China is pushing ahead with expansion plans, opening two stores a day in the world's biggest consumer market.
    • The outlets are banking big on technology, taking payment by facial recognition and having ice cream served by robotic servers, while customers can control background music through their mobile phones like a new-age jukebox.
    • Spun off in 2016 from parent Yum! Brands, Yum China (NYSE:YUMC) shares have jumped 24%YTD.
    • Wall Street banks and hedge funds are closing in on a fix they hope will clean up an $8T portion of the CDS market that's gained a reputation for being one of the shadiest corners in finance.
    • After months of negotiations, Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), Apollo Global (NYSE:APO) and Ares Capital (NASDAQ:ARCC) have agreed to a plan that's intended to ensure defaults are tied to legitimate financial stress, not traders' derivatives bets, Bloomberg reports.
    • The International Swaps and Derivatives Association may propose the overhaul as soon as today.
    • The Federal Reserve is considering imposing stricter rules on foreign bank branches to tighten what critics say is a loophole that has allowed overseas lenders to shield assets from tough U.S. bank rules, Reuters reports.
    • The changes could be a blow for lenders like Deutsche Bank (NYSE:DB), Credit Suisse (NYSE:CS) and UBS (NYSE:UBS) , which have for years held billions of dollars in assets, such as corporate loans, at their New York branches.