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Terrific Tuesday (as usual) – Markets Up, Up and Up!

Wow, what a rally!  

Up 40 points in 3 days on the S&P (/ES) is 1.42% so Everything is Awesome - just like it was before the last crash because it's very dangerous to pin the Awesome Indicator and then something bad comes along and everyone is SHOCKED that things may not be as awesome as they were led to believe.

Today we are waiting on the ever-wise Federal Reserve to come up with yet another excuse not to raise rates (the last Jobs Report comes to mind) or unwind their still $4,000,000,000,000 Balance Sheet.  Keep in mind that these Fed Fund Rates and this Balance Sheet are at emergency crisis levels and keeping the rates this low and the balance sheet this high means the Fed still thinks we are in an emergency of some sort – no matter what market traders may believe.  

All the Fed has done so far is unwind $500Bn (11%) out of $4.5Tn that's on their books – and the market freaked out about that…  

We're not "wrong" in our positioning, just a bit too cautious at the moment, considering the rally.   We reviewed our Money Talk Portfolio, which we trade live on BNN's Money Talk, two weeks ago (3/7) as it stood at $125,790 (up 151.6%) and we couldn't change it because we weren't on the show this month but, even left alone, that well-balanced portfolio is now $130,260 (up 160.5%) gaining almost 10% off our $50,000 basis in 12 days while the S&P went from 2,765 to 2,850, which is up 85 points (3%) so we're certainly keeping up with the gains – it's just that we COULD do much better if we were willing to be more aggressive.  

The Money Talk Portfolio is hedged and our SQQQ hedge lost $800 and our TZA hedge lost $780 as the rest of the portfolio gained $6,050 but that's exactly how hedges are supposed to work – you give up a little of your upside in order to protect yourself if there's ever a downside – though that doesn't seem possible the way this market has been going

The "big" news moving the markets this morning is another extension of Brexit and Merkel commenting that she seeks strong relations with the UK, whether they stay or leave.  As we've learned the past few years, nothing makes the market happier than kicking the can down the road for some reason.  

Speaking of kicking cans – Trump's Budget Proposal puts the country $7.3Tn further into debt over the next decade but it's now being pointed out, even in Murdoch's Wall Street Journal that the budget relies on impossible things just to keep it down to that level – like anticipating $390Bn in revenues from the Affordable Care Act – which Trump is actively trying to repeal.  There's also $510Bn in tax INCREASES in Trump's Budget without which, our annual deficit will top $1Tn per year for the foreseeble future.   Hard to imagine how the Dollar holds even 95 with this budget.  

Of course, Trump wants a weak Dollar as it helps to improve his trade numbers, which have gotten 20% WORSE since he took office.  We still have no deal with China and there's not even a high-level meeting scheduled until June – most likely China is now dragging things out so they can deal with the new President in two years or less.  

Speaking of less, Bob Mueller has proven to be one of the fastest and most effective Special Counsels in U.S. history, racking up indictments at the fastest pace since Watergate. This video runs through the numerous achievements in the Russia probe (only one of 3 major probes being conducted at the moment) and how despite Trump’s relatively short period in office, the Mueller probe has seen “the highest rate of indictments for his aides than any President EVER.”  If it's a Witch Hunt, that's because they are finding A LOT of witches!  


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  1. Phil / Long term portfolio – Phil can you please send out an email for the long term portfolio update from last week?

  2. Quote of the day:

    "Those with the insight and daring to found a business deserve our respect. But once they sell the vast majority of the company to the public, they should not be allowed to run it forever without any shareholder input. Public ownership must mean public accountability."

    (Paul Singer)

  3. Discussion on MJ stocks:

    It’s exciting to watch how the cannabis industry will develop over the next several years. The inflated valuation of the stocks makes for poor risk/reward of buying the traditional cannabis stocks. Until valuations come down and there’s more certaintinity around regulation, investors should puff puff pass.

  4. Good Morning!

  5. Good morning!

    Still waiting for the RUT to confirm the 200 dma at 1,585 (lower now as it keeps not making it) but the other indexes too strong to short – tempting though it may be.  

    LTP/Batman – Just copy the images if you need them in another format.  That's what I would have to do to Email them.

    Ownership/StJ – As an Entrepreneur, I object to that.  Going "public" is just one of the ways you choose to raise funds and there's no special rule that the public, if they are a minority shareholder, should have more rights than any other minority shareholder.   Lyft is raising $2Bn against a $20Bn valuation so 10% of the stock will be floated.  Should the founders give up control along with 10% of the stock?  That's ridiculous.   Singer is an activist looking for more leverage than he deserves – the quote is self-serving at best. 

    Cannabis/StJ – I wouldn't touch the public companies outside of our MJ play, which broadly assumes some of them will do very well.  There are amazing opportunities in small companies all over the country and the money is completely wasted on the ones that already went public.  

    • The recent stock market rally continues, a day after the S&P 500 closed at its highest level since early October; Dow +0.5%, S&P and Nasdaq both +0.4%.
    • Investors are awaiting key central bank meetings this week, in which the Fed on Wednesday and the Bank of England on Thursday are expected to reinforce the view that they are in no hurry to raise policy rates.
    • European bourses enjoy broad gains, with Germany's DAX +1.3%, U.K.'s FTSE +0.6% and France's CAC +0.5%; in Asia, Japan's Nikkei -0.1% and China's Shanghai Composite -0.2%.
    • In the U.S., energy (+0.9%), materials (+0.8%) and financials (+0.7%) are the early leaders among the S&P 500 industry sectors, while the defensive-oriented utilities (-0.4%) and real estate (-0.1%) sectors are the only groups trading with losses.
    • U.S. Treasury prices are mixed, with the two-year yield flat at 2.45% but the 10-year yield is 3 bps higher to 2.63%; the U.S. Dollar Index -0.2% to 96.37.
    • WTI crude oil +0.5% to $59.71/bbl.
    • Paring yesterday's entire 1% loss, the British pound is opening on a firmer footing at $1.3261 following the latest outbreak of Brexit-related volatility.
    • Today should have been the day Theresa May brought her Brexit agreement back to Parliament for a third time, but House Speaker John Bercow barred her from the action unless her deal changed significantly.
    • Reports now suggest she's drafting a letter to EU Council President Donald Tusk, formally requesting a Brexit delay of nine to 12 months.
    • "From next Saturday, we will ban 'Yellow Vest' protests in neighborhoods that have been the worst hit as soon as we see sign of the presence of radical groups and their intent to cause damage," French Prime Minister Edouard Philippe declared after sacking Paris's police chief.
    • In a stronger attempt to shore up its economy, France is also forcing banks to raise its capital buffers to cope with any downturns.

    • Iranian leaders have announced the construction of two new nuclear reactors, which are being built in conjunction with Russia, although it remains unclear if the Trump administration views this as crossing a red line since its abandonment of a landmark nuclear accord in 2018.
    • The news could affect economic sanctions waivers the U.S. was considering, including deals permitting oil imports to eight major Iranian clients, including China and India
    • Crude oil prices reach YTD highs following OPEC’s agreement to deepen their production cuts beyond the quota agreed in December; WTI +0.5% to $59.37/bbl, Brent +0.6% to $67.95/bbl.
    • Saudi Arabia also indicated a willingness to maintain production curbs through to year-end 2019 to keep the oil market in balance.
    • OPEC members had agreed to cut 800K bbl/day from October’s production levels for six months through this June, with Russia and other allied producers cutting another 400K bbl/day for a combined 1.2M bbl/day.
    • But relentless U.S. shale oil production likely will keep a cap on prices; yesterday, the Energy Information Administration forecast oil production from seven major U.S. shale plays would rise by another 85K bbl/day in April to 8.59M bbl/day.
    • Chesapeake Energy (NYSE:CHK+2.8% pre-market as crude oil futures rise and Raymond James analyst James Freeman raises his price target on the shares to $4.50 from $4 and reiterates his Outperform rating.
    • "While we believe that CHK will modestly outspend cash flow in 2019, we believe that the company has a good chance of being roughly cash flow neutrality in 2020, a very positive step as the firm looks to continue paring down debt," Freeman writes.

    • California Rep. Devin Nunes has filed a $250M defamation lawsuit against Twitter (NYSE:TWTR), Fox News reports, saying the company was negligent in failing to remove defamatory and malicious tweets against him and his family.
    • He's charged Twitter and a handful of its users with censoring him and other conservative viewpoints in order to influence the 2018 election.
    • "They need to come clean," Nunes says. "They're not a public square. They are content developers."
    • He's seeking damages along with an injunction compelling Twitter to turn over identities behind accounts he says harassed him.
    • The SEC is doubling down on the government’s demand to find Elon Musk in contempt of a previous fraud settlement.
    • It's "stunning" that he didn’t seek pre-approval of any of his Tesla-related (NASDAQ:TSLA) tweets in the months since he was ordered by a judge to do so, according to the agency.
    • While the EV maker appointed an attorney for the job in late December, that person monitored the tweets in real-time, not approving them beforehand.

  6. Going public/Phil  I think you missed an important part of Singer's comment…
    "once they sell the vast majority of the company to the public"

  7. Good morning Phil.  Can you take a look at some general good hedges.   There has to be a pullback sometime in the near future and I would like to lock in my portfolio gains.  TIA.

  8. Majority/1020, StJ – Ah, I did miss that.  That's different then.  Still, it's Singer pushing his activist agenda but sure, once you sell off your majority and it's held by the public – the public should get an advocate of some kind – just not sure Singer would be my first choice! 

    Hedges/Robert – I like the ones we have (and look at /RTY fail again) but maybe we can adjust them.

    From the OOP:

    Long Call 2020 17-JAN 8.00 CALL [TZA @ $9.50 $0.03] 50 1/30/2019 (304) $19,150 $3.83 $-1.64 $0.58     $2.19 $-0.07 $-8,200 -42.8% $10,950
    Long Call 2020 17-JAN 10.00 CALL [SQQQ @ $10.32 $-0.11] 50 3/7/2019 (304) $15,000 $3.00 $-0.85 $-2.20     $2.15 $-0.10 $-4,250 -28.3% $10,750
    Short Call 2020 17-JAN 17.00 CALL [SQQQ @ $10.32 $-0.11] -20 3/7/2019 (304) $-3,000 $1.50 $-0.50     $1.00 $-0.10 $1,000 33.3% $-2,000
    • TZA is at $9.55 so our calls are $1.55 in the money at $2.19, which seems like reasonable premium for the year.  If the Russell drops 10%, TZA goes up 30% to $12.41 and the calls are $4.41 in the money so probably $5 for $25,000 or $14,000 worth of protection on a 10% drop and a 20% drop would be $16 or $40,000 and that's $29,000 of protection.  Seems about right to me as we're over the 200 dmas and I don't want to overdo the protection and I don't mind spending $10,000 for $40,000 worth of protection this year since our positions will make over $100,000 if all goes well.  
    • SQQQ – We just rolled down from the $12s to the $10s and paid for it with the short $17s.  For SQQQ, 30% is $13.50 and $17 so $35,000 is the max payout and currently net $8,750 so $26,250 upside here means it's less efficient than the Russell hedge but not so much that I want to change it.

    From the STP:

    Long Put 2020 17-JAN 55.00 PUT [TNA @ $64.09 $-0.31] 40 2/15/2019 (304) $28,760 $7.19 $-0.59 $7.19     $6.60 - $-2,360 -8.2% $26,400
    Short Put 2020 17-JAN 35.00 PUT [TNA @ $64.09 $-0.31] -40 2/15/2019 (304) $-8,800 $2.20 $0.33     $2.53 $0.28 $-1,300 -14.8% $-10,100
    Short Call 2019 21-JUN 17.00 CALL [SQQQ @ $10.33 $-0.10] -80 11/20/2018 (94) $-28,000 $3.50 $-3.28 $-14.32     $0.23 $-0.03 $26,200 93.6% $-1,800
    Long Call 2020 17-JAN 10.00 CALL [SQQQ @ $10.33 $-0.10] 200 2/15/2019 (304) $60,000 $3.00 $-0.88     $2.13 $-0.13 $-17,500 -29.2% $42,500
    Short Call 2021 15-JAN 25.00 CALL [SQQQ @ $10.33 $-0.10] -100 2/15/2019 (668) $-22,000 $2.20 $-0.78     $1.43 $-0.13 $7,750 35.2% $-14,250
    Short Put 2020 17-JAN 10.00 PUT [TZA @ $9.54 $0.06] -40 8/29/2018 (304) $-13,000 $3.25 $-1.03 $-55.81     $2.22 - $4,120 31.7% $-8,880
    Long Call 2021 15-JAN 7.00 CALL [TZA @ $9.54 $0.06] 200 3/4/2019 (668) $65,000 $3.25 $-0.15     $3.11 - $-2,900 -4.5% $62,100
    • TNA – $80,000 hedge at net $16,300 means $63,700 of upside protection for the year at a cost of $20,000, which is nothing compared to what the LTP will gain if we don't have a sell-off.  
    • SQQQ – 30% pop to $13.50 and 60% to $17 are what we're looking at now and that would be $140,000 on what is now a net $29,150 spread so $110,000 worth of protection here that we spent net $10,000 on but let's buy back the short June $17 calls as they are not serving any purpose and they are down to 0.23 ($1,840) so I'd rather clear the slot for a potential re-sale on a dip.  
    • TZA – $16 would be $180,000 and now net $53,220 and we spent $52,000 to start so we're actually ahead at the moment.  Again, it's fine and I don't intend to lose $53,220 – at some point we'll roll out to a 2022 spread to protect us for another year but keep in mind that $7 is $2.50 in the money ($50,000) so we can't lose unless the LTP is doing great.  

    So, in short – I don't have better hedges than the ones we have.

  9. CMG – Who says trees don't grow to the sky ?

  10. Cannabis / Phil – One interesting tidbit from that article:

    On a single stock level, Constellation Brands (STZ) is an indirect play on the cannabis theme, which seems reasonably valued. STZ is one of the largest beer and wine distributors in the world with brands such as Corona and Modelo. Recently, STZ planted its flag in the cannabis space with an equity investment in Canopy Growth (CGC). The dealmaking started in October 2017 when it paid $190 million for a 10% stake in CGC. In June 2018, STZ bought a $450 million convertible note and in October 2018, the company paid $3.8 billion to increase its stake to 38%, with optionality to increase its ownership to 50% in the future. STZ evidently has its sights on the cannabis industry with a large balance sheet.

    Looks like it might be interesting to look for traditional companies making entries in the industry. of course, under the assumption that they are not overpaying! Not always the case…

  11. Phil, I have IBM 95 / 120 Jan 2020 BCS and the net is $23.15 out of $25.  Any suggestions on how to can continue to participate in IBM's rally?  I could sell the longs and buy new BCS leaving the shorts but I like IBM and the shorts only have $2.23 premium out of $23.85 of value so not a lot of time value.   I have tired to just sell the spread but the MM won't bite.  Thanks!

  12. Another shameless pump by Tesla.  They are heavily discounting to turn their inventory into cash, which is going to shred margins this quarter.  There are tons of reports online of buyers being offered massive discounts to buy 2018 models in different configurations than what they special ordered.  There is zero evidence that anyone had trouble ordering due to the "high volume of orders".  This is penny stock level of manipulation, on a $50B stock.

  13. Robert IBM You only have 1.85 of credit for the next 10 month. Close the BCS. It is not wise to sell the long call and hold a well ITM short naked, even if you would buy an other say 2012 call.

    You should set up a new 20121 BCS say 130/150 BCS.

  14. Yodi, I agree.  I have sell orders in but the MM don't want to bite……

  15. England could run short of water within 25 years

  16. CMG/Albo – Completely ignoring the rest of the market pulling back.

    STZ/StJ – Same reason I like MO but maybe STZ is better as cannabis goes well with liquor.  I think CGC was a drop in the bucket for STZ and it places them well should things really take off.  Waiting could have been very expensive.  CGC now $16Bn so 40% of it is $6.4Bn so good call by STZ at $4Bn.  Burn rate on CGC is well inside the $4.2Bn in CASH!!! they now have sitting on their books with good sales growth:

    Year End 31st Mar 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue C$m 0.005 0.000 2.37 12.7 39.9 77.9 155.1 246 832 +596.4%
    Operating Profit C$m -0.021 -0.069 -8.43 -3.23 -15.3 -101.5 -425.2      
    Net Profit C$m -0.021 -0.065 -9.35 -3.50 -7.52 -70.4 -411.4 -465.1 -84.6  
    EPS Reported C$ -0.021 -0.064 -0.29 -0.045 -0.063 -0.40 -2.02      
    EPS Normalised C$ -0.021 -0.064 -0.55 -0.36 -0.094 -0.43 -2.01 -1.78 -0.24  
    EPS Growth %                    
    PE Ratio x           n/a n/a n/a n/a  
    PEG x           n/a n/a n/a n/a

    Still, a very long time before they justify a $16Bn valuation.  

    New Age is going to get to be a $1Bn company the old-fashioned way – we're going to drop $50M to the bottom line and get a 20x valuation!  

    Speaking of which, I have a 2:30pm meeting with Delivery Dudes, who are the primary food delivery service in Florida – so I'm out of here shortly.  They are considering picking up our Hemp Boca (CBD only) line for delivery in Florida (and notice our product line keeps expanding every time you look).  They deliver 400,000 meals a week and about 8% of the people in Florida (1.6M) use CBD regularly so 8% of 400,000 is 32,000 good chances to make a sale – even if we make just $5 10,000 times a week (2.5% conversion) - could be good numbers – and that's just one partnership in one state!  

    We're still putting together that $100M Cannabis Fund for Q3 so let Greg know if you are interested.  

    IBM/Robert – I would just close it and start fresh, you are just restricting yourself to avoid calling it a new trade.  I would just pick up the 2021 $130 ($19.50)/150 ($10.50) bull call spread for $9 and you are taking more than 1/2 off the table and, if IBM dips, you can then sell puts (the $110 puts are $6, the $120 puts are $9 so $9 for the $110s would be nice) and use that money to roll your calls lower.  

    As to selling the spread.  If you can afford it, there's nothing wrong with having both for a bit and then you can ask for $47 for the Jan $95s and offer $23 for the Jan $120s and one of them will fill and, if it's the short calls, you don't mind being a bit long on IBM while you wait (hopefully you can sell the puts) and, if it's the long calls, you are well-covered by the new spread while you wait and you could set a stop at $25, which would still net you out for $22 and IBM would already be up $5(ish), putting your new spread in very good shape. 

    And what Yodi said!  

    TSLA/Palotay – I still worry it will implode and take the whole market with it.  

  17. LRET – how does a stock that has a 7.99% yield have a YTD return of 25.36% ???

  18. Phil/TSLA – I’m hoping that happens. 

  19. Good luck at your meeting, Phil. Always love hearing what's cooking with New Age II.

  20. Good talk on REITs over the past few days from Albo and others - I've been starting small positions and watchlists based on that, so thank you :)

  21. Thanks Phil on IBM.  Great suggestions.

  22. Damn man, EVERY time I get out of my chair the market turns red!  

    LRET/Tangled – They did 0.32 in Jan, that pumped it up last year.  I assume it was a special dividend. 

    Meeting/Ati – Went pretty well but it was a Hemp Boca (CBD) meeting, not New Age (THC), though New Age supplies to Hemp Boca (I love synergy) and Hemp Boca gets the door open for New Age. 

    Big week at Hemp Boca with an appearance at the IPic (fancy movies) grand opening Thursday noon, which I will be attending and then Friday Night we have a distributor meeting and Sat we're doing a major show at the BBT Center (where the hockey team plays).  

    You're welcome Robert. 

    Check out this pricing for private jets – too rich for my blood! 

    Elite Access Membership Highlights:
    - $100k deposit and the funds are deducted from your account, the same way a debit card works.
    - Simple, all-in hourly rate of $8,500 for supermid, $6,750 for mid-size, $5,500 for light jet
    - Guaranteed Access with 24 hours notice
    - Complimentary catering credit of $250 per flight leg.
    - Refundable and no expiration timeframe to use your funds. 

    I've been trying to get a partnership for our Luxury Travel Business (Experian Travel) but they are all around these prices and I guess they can't help it as that isn't that much over the cost of running a jet yourself.  

    On the basis of what I've been learning, I wouldn't put a dime into any of these private jet companies.  NetJets was doing well for a while but way too much competition now. 

    I do love Clear though, they are getting bigger and I think they are about to do a Private PlacementHere's their Wiki.

  23. Poll: Support rises in all age groups for legal pot

  24. Lyft IPO Oversubscribed Ahead of Listing Next Week

  25. Trump Picks Former Delta Executive Stephen Dickson as F.A.A. Chief

  26. Phil, are you in kc? If so what month and what basis now? Thanks