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Turnaround Tuesday – Markets Pop Back Just Because

Related imageNo, nothing happened.  

Still, we're up 0.6% pre-market across the board and we're just waiting to see if the Russell can get back over it's Strong Bounce Line at 1,532 to confirm the bullish action of the rest of the indexes.  As I mentioned in yesterday morning's PSW Report, we were playing for the bounces off "Dow (/YM) 25,300, S&P (/ES) 2,800, Nasdaq (/NQ) 7,300 and Russell (/RTY) 1,500" and in our Live Member Chat Room, at 9:51, I put up the following note to our Members:

Good morning!

Big Chart not bad, only the RUT failed the 200 dma (and the 50) so we need to see 1,523 come back and the rest is just normal bouncing which would be:

Dow 26,000 to 25,400 is 600 points so 120-point bounces to 25,520 (weak) and 25,640 (strong)

  • S&P 2,860 to 2,790 is 70 points so 14-point bounces to 2,804 and 2,818

  • Nas 7,525 to 7,300 is 225 so 45-point bounces to 7,345 and 7,370 

  • Russell 1,580 to 1,500 is 80 points so 16-point bounces to 1,516 and 1,532 

As you can see, we made a nice entry into the 10 am dip and caught that great upswing that gave us weak bounces across the board and stopped out when the strong bounces failed but then got another shot to get in in the afternoon and now we've flown up to our strong bounce levels, which hopefull won't be rejected today so we can get back to playing the market (we've been watching and waiting since last week, for the most part).  

There's no particular news or data moving us higher – just the lack of bad news, I suppose.  As you can see, the VIX is still elevated so someone is worried about something but we've learned not to fight the tape so we'll simply use the VIX falling below 15 as an all-clear sign to get more bullish (assuming it happens).

Boeing (BA) is bouncing back and that's helping and Apple (AAPL) just announced a whole bunch of service products and they are back over $191 this morning so that alone (1.5%) is enough to move the entire Nasdaq up 0.3% so half the rally is Apple, half is Boeing and the other half will have to come from the other 6,000 companies – which is why we're very interested in the Russell 2000 today.

The Russell was the canary in the coal mine earlier in the month, that warned us not to get to bullish so we'll see what it has to say about this new bounce pattern.  Meanwhile, Oil (/CL) is testing $60 again and that's a very good shorting line with very tight stops above.  Gasoline (/RB) is $1.96, not as good of a line but way too high with Easter still a month away.  Natural Gas (/NG) is a relative bargain at $2.74 but we like the October contracts (/NGV19) at $2.90 so we can ride them into hurricane season if the demand doesn't get us there first. 

We picked up almost $2,000 on our Coffee (/KCN19) longs this morning a trade idea from Thursday Morning's PSW Report that you can subscribe to here for $3/day!  I'm sure there are many newsletters that show you exactly how to make $2,000 in 3 trading days – so I thank you for considering ours!  Oh and, despite the market pullback, our well-balanced Money Talk Portfolio that we highlighted for you in Friday's PSW Report – that's flat despite the downturn because it is, as we claimed, very well-hedged.  

We haven't added hedges yet and we're sure not going to take any away.  We remain Cashy and Cautious while we wait for the market to pick a direction and stick with it more than a day.  

 


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  1. Phil,

    WPM (10 contracts) currently have a sold 2021 15P for 2.20;

     Looking at the above WPM write up on the bull call spread of 2021 17.5/25 for $4.45, would it be better to buy back the put and sell another 2021 20P for $1.51 (take about $1.53 of the original put profit off the table), or am I taking on a bigger risk. Your feed back appreciated always. Thanks




  2. Only  the best people:

    https://www.aier.org/article/sound-money-project/trouble-stephen-moore

    While Moore’s stated positions are consistently at odds with the consensus view in macroeconomics, they map incredibly well to a hyper-partisan policy framework. As the Mercatus Center’s Scott Sumner has written, Moore seems to favor “tighter money when a Democrat is president, and the economy is depressed and clearly needs easier money,” and “easier money when Trump is president, and the economy is booming and does not obviously need easier money.”

    Moore provides further support for the hyper-partisan explanation. Whereas most economists would prefer to insulate the Fed from short-term political pressures, Moore seems to want a Fed that is entirely beholden to the president — at least while his man is in the White House. “Who is the Fed responsive to, if not the president?” he said on CNN in December 2018.


  3. Good Morning!


  4. Good morning!  

    Now we're up almost 1% so off to a good start.  The crazy thing is that 1% is 250 Dow points – so it seems like a huge deal.

    WPM/Jasu – I take it you sold the WPM 2021 $15 puts for $2.20.  Those are now 0.13, so not doing you much good at all.  As long as you'd REALLY like to own WPM for the net, the 2021 $20s are $1.50 but I wouldn't sell them for that price as it's crap premium and they are high in the channel.  I'd clear the decks for 0.13 and wait patiently for a pullback or, if it never comes, that $17.50/25 spread starts to look really good!  

    BBBY looking good too this morning as activist investors seek to flip the board.  

    Big Chart – RUT has a bad "M" pattern, where each point is lower than the one before.  SPX, on the other hand, has a bullish M pattern so far, as does the Nas while Dow and NYSE seem neutral.  Still all about RUT 1,525 (200 dma) and 1,532 (strong bounce) this morning.  If we clear it and hold for the day – back to bullish.

    Trend/StJ – Good way to look at things.  

    Moore/StJ – Really might be time to start packing if this guy gets on the Fed.  


  5. Phil, rec's for new position in Dis?


  6. MoviePass Parent Helios & Matheson Raises $6 Million In Funding — MarketWatch

    Font size: A | A | A

     

    9:16 AM ET 3/26/19 | MarketWatch

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    10:02 AM ET 3/26/19

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    MoviePass Parent Helios & Matheson Raises $6 Million In Funding — MarketWatch

    MoviePass parent Helios & Matheson Inc. (HMNY) said Tuesday it raised $6 million in a new round of financing. The company said it plans to use the proceeds from the financing to support its MoviePass subscription business, including accelerating product development, improving its technology and increasing investment in new films. "We are building the infrastructure, data and tools that we believe will power the next generation of MoviePass," said Helios Chief Executive Ted Farnsworth. Under terms of the financing, Helios reached an agreement for the purchase of 60,000 preferred shares by certain institutional investors, which are convertible into about 1 billion shares of common stock and accompanying warrants to by about 60,000 preferred shares. Helios shares plummeted 37% in premarket trade, to below a penny. The stock has lost virtually all of its value over the past 12 months, while the S&P 500 has gained 5.3%. 

    -Tomi Kilgore 


  7. 1 BILLION shares… hilarious


  8. DIS/JMD – Better in at $100 but I love DIS so, as a new position we can:

    • Sell 5 DIS 2021 $100 puts for $8.25 ($4,125) 
    • Buy 10 DIS 2021 $105 calls for $16.70 ($16,700) 
    • Sell 10 DIS 2021 $120 calls for $10 ($10,000)

    That's net $2,575 on the $15,000 spread that's $5,000 in the money at the moment.  Upside potential is $13,425 (521%) but, don't forget, one movie flop or terror attack and they can drop like a rock so you have to REALLY want to own 500 shares of DIS at $100 for the LONG-term to play them.  

    HMNY/Jabob – Makin' their move!

    Dow 25,800! 

    /RTY blasted through at 1,541 now.  2,833 and 7,425.

    Oil $60.09, /RB $1.97, /NG $2.747


  9. CMG – Still climbing.  How high is high ?

    Tempted to put on a bearish call spread.  But only with stops.


  10. CMG/Albo – Holy crap!  

    Really whipped back from yesterday's drop. 

    Here's /CL finally failing $60, /RB failing $1.975.


  11. Phil,  What are your thoughts on ETM these days?  The stock is down to $5.30, due to an "impairment charge" taken when the last earnings were released.  The yield is very attractive, 6.79%.  I am currently in the stock at $7.12, and sold the Jan 20 8 calls for $1.33 and a half allotment of the 8 puts for $1.85.   Is it worth adding to this position at the current levels?  Thanks for your feedback.

     Here is an article from Seeking Alpha on ETM:  https://seekingalpha.com/article/4249995-entercom-communications-impairment-losses-vs-management-guidance


  12. Phil// Any recommended trade on ARR?  Since the rate is not likely to go up (based on Fed's comments) what is keeping the stock low?  Thanks.


  13. Phil / Any thoughts on whether slightly inverted yield curve will affect NLY? It goes ex-div on Thursday.


  14. ETM/John – I don't follow them that closely but it looks to me like they purposely debased the value so they could buy back stock cheaply.  It's possible they are being acquired for $8.50 to $9 and management wants the stock lower so they can add to their own pile, buy back shares from people who bail and make the offer more palatable, as it is only 20% higher than they were at the beginning of the month but now 70% higher than the current price – so it will pass easily.  Radio guys are generally sleazy, so not surprising if they are scamming their own stockholders.  

    Maybe the impairment was just a tax move, it seems extremely arbitrary though they claim it was triggered by a decrease in the company's stock price.  As noted by the author, who did a good job:

    As mentioned in the lines above, determining the fair value for those licenses and the stations themselves is based on past performances and “future estimates”. In fact, it’s based on a DCF, and a lower valuation from a DCF implies higher WACC, lower earnings growth or even earnings decreases as inputs or assumptions to this model. So, when the company records an impairment loss, it is mostly due to worst-than-expected future revenues and profits, particularly from the CBS merger. Management seemed very excited about the future of ETM with Radio.com, EAN, and Audience Analytics (growth segments). Then, why are future performances for stations lower than previously expected? The company’s public filings don’t provide any detail about the relation between the broadcasting licenses or the operating performance of the stations and the revenues generated by its growth (digital) segments. I think there is no such relation due to the decrease in the fair value of the broadcasting licenses and goodwill. Also, in my opinion, this impairment recorded implies a form of manipulation by the management that has been buying cheap and is willing to buy cheaper.

    Anyway, to me, if I had the stock at $7.12 with short Jan $8 calls (now $0.30) and 1/2x Jan $8 puts (now $3) – I'd consider that you netted in for right about $5 and net $6 on 1.5x if assigned so $5.29 is no big deal at all.  I'd buy back the short $8s ($5.30 net) and hopefully sell them again for $1 but, otherwise, I'd just wait and see unless you want to gamble, then I'd buy the Jan $5s for 0.95, also looking to cover with the $8s for $1 on a bounce.  

    ARR/Rookie – Big dividend REITs are like Bonds, they'll move when a big analyst says they should move and that's that.  Sentiment on REITs is still very negative.  Still, if you go into a REIT looking for price appreciation – you are making a big mistake.  Buy the stock, collect your dividends for the next 20 years and only worry if they say they can't pay it or they are going to reduce it.  

    NLY/Soma – See above, same issues as ARR but NLY has been holding up well.  People may just be waiting for the 30 cents but I think this one has a very hard time moving off $10 anyway.  

    Again guys, when a $10 stock pays out $1.20 in dividends and next year it's still at $10 – that's up 12% for the year!  


  15. Phil// Thanks for the clarification.  I wasn't sure if people are expecting a dividend cut and hence the price depreciation.  


  16. Well, so much for another rally.

    • Dow 26,000 to 25,400 is 600 points so 120-point bounces to 25,520 (weak) and 25,640 (strong)

    • S&P 2,860 to 2,790 is 70 points so 14-point bounces to 2,804 and 2,818

    • Nas 7,525 to 7,300 is 225 so 45-point bounces to 7,345 and 7,370 

    • Russell 1,580 to 1,500 is 80 points so 16-point bounces to 1,516 and 1,532 

    Lost all our strong bounce lines.  


  17. CenturyLink: Fiber-Rich Profits

    Here is what Mason Hawkins' (TradesPortfolio) Longleaf Partners investment managers stated in their fourth-quarter 2018 shareholders letter: ”CenturyLink remains an overweight position given its deep discount and the quality of both its management team, led by CEO Jeff Storey, and its fiber assets, which we believe are of high strategic value to numerous infrastructure investor.”


  18. Pstas – As you recall they also went from a passive investor to an active investor.  They are seeking board representation, and for CTL to sell some of their non-essential fiber assets which they say are extremely valuable.  It's just unfortunate that they cut the dividend.


  19. Played /RB from $1.9701 for a $2121 gain on 5 contracts, then lost my nerve and jumped out. But it was fun while it lasted.


  20. Albo- I have less concern about the dividend as long as the cash flow is devoted to debt reduction which is the stated goal. We shall see, as always. 


    • March Consumer Confidence124.1 vs. 133.0 consensus; 131.4 prior in February (unrevised).
    • Present situation Index 160.6 vs. 172.8 prior.
    • Expectations Index 99.8 vs. 103.8 prior.
    • February Housing Starts-8.7% to 1.162M vs. 1.201M expected, 1.273M prior (revised from 1.230M).
    • Building permits 1.296M vs. 1.300M expected and 1.317M prior (revised from 1.345M).

    • Mastercard (MA +0.9%sees banks following Apple's lead in getting rid of the number on credit cards to increase security if a customer loses the card, Bloomberg reports.
    • On Monday, Apple partnered with Goldman Sachs to unveil the Mastercard-branded Apple Card.
    • Banks issuing credit cards may decide to go with more secure limited-use numbers, says Craig Vosburg, president of North America for Mastercard.
    • Security, and Apple's reputation for protecting customers' privacy, may be a big advantage for the Apple Card, CNBC reports.
    • "Money is just a form of data, and Apple has been great at managing access to data," Ryan Gilbert, general partner at Prospect Ventures, told CNBC.
    • Instead of a number on the physical card, the Apple Card uses a on-time use authentication code that's protected by either fingerprint or facial recognition via the iPhone.
    • Previously: Apple launches News+, Channels, TV+ and more (March 25)
    • Health insurers are under pressure in response to a brief from the U.S. Department of Justice siding with a December 2018 ruling by a Texas district court that the Affordable Care Act (ACA), also known as Obamacare, is unconstitutional and should be struck down.
    • Considering the Democratic majority in the House, however, a significant change to the ACA seems remote.

    • President Trump wants to work with Democrats on reducing U.S. drug prices, one of two areas (infrastructure funding) that his administration is seeking cooperation on. He has stated on numerous occasions that reining in drug prices is a top priority.
    • Drug makers appear to moving quickly to raise prices before any government action. According to Reuters, about 30 companies have taken steps to end their self-declared moratorium on increases this year.
    • Executives from five pharmacy benefit managers will appear before the Senate Finance Committee on April 3 to answer questions about their roles in drug prices. Pharmaceutical executives appeared before the committee a month ago.
    • Selected tickers: UnitedHealth Group (UNH -0.8%), CVS Health (CVS +1.7%), Cigna (CI -1.5%), Humana (HUM -1.8%), Takeda (TAK +1.7%), Bausch Health Companies (BHC +1.2%), Roche (OTCQX:RHHBY +1.3%), AbbVie (ABBV +1.9%), Allergan (AGN +2.3%), AstraZeneca (AZN+1.1%), Bristol-Myers Squibb (BMY +1.8%), GlaxoSmithKline (GSK +1.2%), Johnson & Johnson (JNJ +1.6%), Eli Lilly (LLY +1.5%), Merck (MCK +0.7%), Novo Nordisk (NVO +1.1%), Pfizer (PFE +1.5%), Teva Pharmaceutical Industries (TEVA -0.6%)
    • Soda-maker, Jones Soda rises (OTC:JSDA +42.6%) as it receives investment from SOL Global Investments (OTCQB:SOLCF +2.2%)
    • SOL Global acquires ~3.4M Jones Soda shares in the open market, representing ~8.2% of the total Jones Soda outstanding shares.

    • Homebuilders stocks slip after February housing starts fell more than expected and consumer confidence slipped in March.
    • Meanwhile, the S&P Corelogic Case-Shiller home price index rose less than expected in January, while the FHFA housing price index for the same month exceeded consensus.
    • BlackRock's iShares Dow Jones U.S. Home Construction ETF (NYSE:ITBfalls 0.8% in midday trading.
    • Hovnanian (HOV -2.2%), usually pretty volatile, declines the most, followed by D.R. Horton (DHI-2%), Taylor Morrison Homes (TMHC -1.1%), NVR (NVR -1.2%), and Toll Brothers (TOL -0.9%).
    • ETFs: XHBITBPKBNAILHOMLHOMZ
    • Wells Fargo remains "constructive" on the cruise line industry, despite the soft profit guidance issued earlier today by Carnival (CCL -8.1%).
    • Analyst Tim Conder thinks Carnival's weakness is tied to the unfavorable fuel/FX impact on its bottom line and concerns over pricing with the Costa brand.
    • Conder sees no read through for Norwegian Cruise Line Holdings (NCLH -1%) and Royal Caribbean (RCL -0.4%). "We believe RCL & NCLH continue to relatively outperform," he writes. All three cruise line stocks are still rated at Outperform by Wells Fargo.
    • Previously: Carnival beats by $0.05, beats on revenue (March 26)
    • Previously: Carnival -7% after guidance disappoints (March 26)
    • Gannett (GCI +1.6%) has filed a definitive proxy statement as it faces a hostile pursuit from MNG/Digital First.
    • It's urging a vote for eight independent director nominees, vs. a slate being presented by MNG and its majority owner, Alden Global Capital.
    • MNG is looking to take control "through a problematic, two-pronged approach" of demanding a sale and then presenting a rival slate, Gannett says.
    • "Your board believes that MNG’s nominees would not bring any additive skills or experience to the Gannett board," the company says. "Additionally, your board is cognizant of Alden’s history of engaging in transactions that have destroyed value while lining the pockets of Alden and its affiliates, including, at MNG, stripping newspapers of certain assets while paying Alden generous management fees."
    • Gannett also says all six of MNG's candidates exhibit "obvious and significant" conflicts of interest.
    • The company's annual meeting is set for 8:30 a.m. ET on May 16.
    • The U.S. Coast Guard reopened the upper Houston Ship Channel this morning following a chemical spill that had halted ship traffic for several days.
    • Ship traffic is limited through the area of last week's chemical spill at the Intercontinental Terminals storage facility at the rate of one per hour during daylight hours.
    • Four refineries are affected by the restrictions: Shell (RDS.ARDS.B) Deer Park, Lyondell Basell (NYSE:LYB) Houston, Valero (NYSE:VLO) Houston and Petrobras (NYSE:PBR) Pasadena Refining System.
    • LYB cut production yesterday by 14% at its 263K bbl/day Houston refinery and Shell reduced output at the 275K bbl/day Deer Park refinery by any unknown amount.
    • Exxon Mobil’s (NYSE:XOM) 560K bbl/day Baytown refinery was not affected by the traffic limitations, and Texas City refineries also were not affected by the spill.
    • U.S. crude oil breaks above $60/bbl, as market participants regain focus on the tight supply situation and away from concerns about weaker demand from a potential economic slowdown; WTI +2.4% to $60.27/bbl, Brent +1.4% at $68.14/bbl.
    • “Lower OPEC+ production due to improving compliance and renewed power outages in Venezuela likely triggering further disruptions are supporting oil prices,” says UBS commodities analyst Giovanni Staunovo.
    • “As long as OPEC’s output remains depressed and global oil demand and oil demand growth stay around the current level, money managers will likely keep investing in oil, thus supporting the price,” says Tamas Varga of PVM Oil Associates.

    • The proportion of bonds paying less than zero percent interest increases to one-fifth of the market, a 16-month high, Bloomberg reports, citing data it compiled.
    • After the Federal Reserve turned more dovish than expected, investors turned to safe havens, which led to lower Treasury yields and a yield curve inversion on Friday.
    • A Bloomberg index tracking outstanding negative-yielding debt pushed past $10T on Friday. On Monday, it crept up again and is hovering at the highest level since September 2017.
    • Negative-yielding debt accounts for more than 19% of the market value of the Bloomberg Barclays Global Aggregate Bond Index, which tracks a range of global investment-grade debt from Treasuries to corporate and emerging-market issues.
    • The Chinese government says it will lower the highest subsidy for new energy vehicles by 50% as part of a plan scale back completely after 2020.
    • The Ministry of Finance lists the new subsidy for pure battery electric cars with a driving range of +250 miles to 25K yuan ($3.7K) per vehicle from 50K yuan. Local governments are also being asked to pull back on subsidies as the Ministry hopes local manufacturers ramp up innovation to keep competitive.
    • New Jersey lawmakers have canceled their planned vote on Monday, April 1, on legalizing the recreational use of marijuana for adults at least 21 years old.
    • Backers say they have yet to garner enough support in the state Senate for the measure.
    • The vote may be rescheduled for May.
    • The Civil Aviation Administration of China has reportedly suspended the 737 MAX 8's airworthiness certification, which took Boeing (NYSE:BA) 15 months to get and finally obtained in October 2017.
    • It follows a report from the NYT that suggested "during flight simulations recreating the problems in the fatal Lion Air crash, pilots discovered that they had less than 40 seconds to override the Boeing 737 MAX MCAS system and avert disaster."
    • Meanwhile, the preliminary report on the March 10 Ethiopian Airlines 737 MAX crash will very likely be released this week, according to Ethiopia's transport ministry.
    • BA +1% premarket

    • Investors should "aggressively buy" Boeing (BA +0.6%) shares as the stock’s recent slump already reflects the grounding of the 737 MAX and a possible reset of 2019 guidance, according to Robert W. Baird analyst Peter Arment.
    • "We believe the risk/reward is very compelling on the Boeing stock at current levels," he declared, recommending that both short- and long-term investors aggressively buy shares.
    • Arment expects a software solution for the 737 MAX within days and implementation to begin immediately for grounded aircraft and those awaiting delivery.
    • He also lowered estimates for Boeing's 2019 deliveries and cut his earnings estimate for the year by $0.40 a share, to $19.85.
    • Carnival (NYSE:CCL) is down 6.62% in premarket trading after setting guidance below expectations.
    • The cruise line operator expects Q2 EPS of $0.56 to $0.60 vs. $0.73 consensus and full-year EPS of $4.35 to $4.55 vs. $4.77 consensus and $4.50 to $4.80 prior. The company points to changes in fuel prices and foreign exchange rates in setting the outlook.
    • Needham warns that Apple's new streaming video service could "poison" Netflix (NASDAQ:NFLX) as it arrives to compete directly with 900M captive users already in the hopper.
    • Analyst Laura Martin notes that Apple also has the ability to bundle games, news, music and TV as it sells iPhones to build up the service. Needham keeps a Hold rating on Netflix.
    • On the other side of the ledger, Raymond James thinks the competition from Apple isn't anything Netflix hasn't already seen. "Similar offerings already exist, suggesting this service is more incremental than revolutionary," observes analyst Justin Patterson. "We believe Apple’s and Disney’s launches will not adversely affect Netflix’s competitive position," he concludes. RJ sticks with a Strong Buy rating on Netflix and price target of $470.
    • Netflix is flat in premarket trading after shares also rode through yesterday's Apple event unscathed.
    • McDonald's (NYSE:MCD) acquisition of Dynamic Yield is expected to give it the ability to vary electronic menu boards based on time, weather and regional factors, according to Bloomberg. The flexibility could allow McDonald's operators to respond to customer preferences in real time.
    • The restaurant company fired off the deal after giving Dynamic Yield's technology a test drive last year. The $300M deal is the largest since the company's investment in Chipotle more than 20 years ago.
    • "Technology is a critical element of our Velocity Growth Plan," notes CEO Steve Easterbrook on the deal. "With this acquisition, we're expanding both our ability to increase the role technology and data will play in our future and the speed with which we'll be able to implement our vision of creating more personalised experiences for our customers," he adds.
    • Shares of McDonald's are up 0.51% in premarket trading to $186.66.
    • Cronos Group (NASDAQ:CRON) is up 2% premarket on light volume following the release of its Q4 and 2018 results. Highlights:
    • Wholly owned licensed cannabis producer Peace Naturals Project completed the first harvest in December in the newly completed Building 4 (286K sq. ft.).
    • An 850K sq. ft. facility to be built in Kingsville, Ontario.
    • 45K sq. ft. greenhouse in Israel will be completed next quarter. Manufacturing facility will be completed in H2.
    • Earlier this month, a $2.4B equity investment by Altria Group closed.
    • Q4 revenue: $5.6M (+250%); gross profit before fair value adjustments: $2.5M (+525%).
    • Q4 operating expenses: $12.4M (+328%).
    • 2018 revenue: $17.1M (+317%); net loss: ($19.1M); loss/share: ($0.11); cash flow ops: ($9.7M) (-76%).
    • Update: Shares are now down 3% premarket after Q4 revenue missed consensus of ~$9M

  21. "Negative-yielding debt rises to a fifth of the global market"

    I still have trouble wrapping my brain around this phenomenon. We truly are in uncharted waters. 


  22. /ALK I've got 20 70/57.5 ALK 2020 call spreads. Obviously not doing well. I could cash them in for about $6000 and thinking about using the money to buy 20 of the 50/60 spreads for $8937and sell 10 of the 47.5 puts to make up the difference. Thoughts?


  23. CCL as above now 9% down on future profit down scaling. The stock pays a 3.9% div. and as negative as stock holders feel today now is the time to possible add more stock or sell a Jan 20 50 put at 4.25 or both.

    As always in small numbers but something to think off.


  24. ALK do we not only hold a Jan 20 60 put we sold? I got a credit of 7.80 so still better than the stock price of 53.64.


  25. AAPL Just a while back we had a fiery discussion about the stock, as I was the one who asked the question ‘‘ is AAPL a one horse pony ?‘‘.
    Today I cannot fail noticing that AAPL is scrambling to add more diversification to its products, with the result of not enticing to many buyers.
    I hope I am wrong!!!!


  26. ALK / yodi – my position is not a PSW trade.


  27. Phil,  You haven't suggested any BA spreads since the stock has tanked.  I take it that this means that you are still waiting for the stock to be hammered some more.  Given that a fix for the 737 MAX issue seems like it will be forthcoming, are you still thinking that BA may drop to $300?


  28. Good playing Dawg!  Making quick money and running is the key to winning the Futures:

    Negative/Pstas – How much are you willing to pay to have someone hold your money?  I suppose, technically, we are always paying a bank to hold our money because they pay us less than if we put the money to work ourselves and what do they do with our money?  They put it to work and take the profits!  Since the banks are not able to generate a lot of profits these days but  they still want to make the same spread – they are now telling us we need to accept a negative return on our end so as not to impact their end and, as you can see – record numbers of idiots put up with this nonsense!  

    ALK/Dawg – I just flew them to LA, very nice!   All the airlines are in the dumps but 2020 is a bit short of a time-frame.  I take it you have the Jan $57.50/70 bull call spread and I'd sell the calls for $4.25 ($8,500) and roll out to the 2021 $60s at $6 ($12,000) and you can sell 10 of the 2021 $45s for $4.50 ($4,500) to pay for that (net $1,000 credit) and that way, as the short $70s (now $1.15) decay below 0.50, you can then sell the 2021 $70 calls (now $3.25) and use that money to roll the $60s to the $50s (now $10.30) and then you'd have the 2021 $50/70 spread for no extra money.  

    CTL/Yodi – The new FTR, just down and down simply because it's out of favor.

    And there's not much room because FTR is still FTR:

    AAPL/Yodi – A lot of naysayers but that happened with ITunes and the App Store too when they launched.  It amazes me how people still don't give AAPL the benefit of the doubt on anything they do. 

    Hit my $198 goal on the button – should have played it!  

    March 25th, 2019 at 10:02 am | (Unlocked) | Permalink 

    BA could rally back if FAA is approving software fixes and they are down 80, which is 320 Dow points (not all in a day!) and AAPL has an announcement today (streaming mostly) at $188 could jump 10 for 80 Dow points today and would still have miles to go if people believe they can add another $10Bn (20%) to revenues.  

    BA/John – That's because it's too dangerous to be wrong on.  The 737 Max is BA's future and if it's grounded, they don't really have a back-up plan and could get hit for many Billions while they fix the problem as well as possible fines from many countries if they find they acted negligently.  Also, it's not just a technical issue, it's a political one.  China just stuck it to Trump yesterday by ordering $35Bn worth of Airbus models instead of BA 737s they were counting on.  What are they saying to Trump with that when that was 10% of the trade balance he wants them to fix – that was a massive FU just when we (USA/Trump/BA) needed a favor and a vote of confidence from a friend.   

    When there are too many moving parts, it's actually very easy to decide just not to play.  $360 is no massive bargain on BA, it's $205Bn and they made $10.5Bn last year (paying just $1.1Bn in tax) so about 20x earnings is kind of a lot for a cyclical company that's in the top of a cycle.  What if another one crashes?  Do you NEED to own BA that badly that you want to buy a stock with so many risk factors for a HIGHER price than people have been buying it for all of 2018 – when those factors weren't even being accounted for?  

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 2019E 2020E CAGR / Avg
    Revenue $m 86,623 90,762 96,114 93,496 94,005 101,127 111,307 118,431 +3.1%
    Operating Profit $m 6,562 7,473 7,443 6,527 10,344 11,987     +12.8%
    Net Profit $m 4,585 5,446 5,176 5,034 8,458 10,460 11,504 12,990 +17.9%
    EPS Reported $ 5.97 7.38 7.44 7.83 11.8 17.9     +24.5%
    EPS Normalised $ 5.95 7.39 7.44 7.84 11.7 17.7 20.2 23.4 +24.4%
    EPS Growth % +16.3 +24.4 +0.7 +5.3 +49.9 +51.0 +13.7 +16.1  
    PE Ratio x           20.9 18.4 15.8  
    PEG x           1.53 1.14 1.19
    Profitability

    They deliver about the same amount of planes every year.  The dramatic increase in profits comes from a dramatic drop in R&D spending and CapEx from tooling up for new planes.   If they have to take a step back and re-tool – they can go back to $6-7Bn in earnings for a year or two and that's only if you ignore the potential for cancelled orders that can further spook investors (which would THEN be a buying opportunity).  


  29. ITC Judge Finds Apple Infringes Qualcomm Patent -BloombergAAPL - An International Trade Commission judge found that Apple Inc. (AAPL) infringes a Qualcomm Corp. (QCOM) patent and is recommending an import ban on certain iPhones, Bloomberg reported Tuesday. 

    The case is one of two that Qualcommbrought at the ITC. 

    https://www.bloomberg.com/news/articles/2019-03-26/apple-infringes-qualcomm-patent-judge-recommends-iphone-ban 

    Write to Josh Beckerman at josh.beckerman@wsj.com 

    > Dow Jones Newswires


  30. dawgydaddy, yes I understand. The stock shows to pay a div. of 2.6% telling me one would not achieve great premiums in respect to BCS plays. However in your situation I would sell the long 57.5 call and leave the 70 caller open. Buy the Jan 21 50 call and only sell half the 47.5 or even 50 Jan 21 put. Hold back of selling any 21 callers until the stock shows better recovery, and then only sell 1/2 the amount of callers as you still hold the Jan 20 caller. I would not pay 1.25 premium for a 70 caller.


  31. Yodi – Regardless of the video streaming product they announced yesterday, or the credit card, they just dropped a subscription based $10/mo product, that I consider to be a good value, into the hands of 750M users. At a 10% penetration, that's 9.0B per year in revenues, also more than half a NFLX. What are they going to do after they get going? Long Apple!


  32. CNET has a good article on the APPL/QCOM thing:

    In late 2017, in the case that Judge Pender is overseeing, Qualcomm asked the ITC to ban the import and sale of certain iPhones that use Intel's 4G modem. Those would've included the iPhone X88 Plus7 and 7 Plus that run on AT&T and T-Mobile. The phones that run on networks from Verizon and Sprint use Qualcomm's modem and wouldn't have been included in the ban.

     

    The companies next face off on April 15 for a trial over Qualcomm's licensing practices. Because Qualcomm owns patents related to 3G, 4G and 5G phones — as well as other features like software — any handset maker building a device that connects to the networks has to pay a licensing fee, even if it doesn't use Qualcomm's chips. Apple and the companies that build its phones, like Foxconn, don't believe Qualcomm charges a fair rate. That trial, also in San Diego, will last 20 days before being handed to the jury. 

    At the same time, Qualcomm is waiting for a judge's decision in a US Federal Trade Commission's lawsuit that argued the chipmaker is a monopoly. The FTC two years ago accused Qualcomm of forcing customers like Apple to work with it exclusively and charging excessive licensing fees for its technology. 

    Because of the legal disputes, Apple has moved away from using Qualcomm modems in its devices. Its newest phones, the iPhone XSXS Max and XR, use only Intel 4G chips.

    The whole article gives a nice overview of the battle.


  33. Wow, Nas is red now.  AAPL was about 1/2 the Dow's losses when it flipped, probably all of the Nas.  /RTY still up 0.5% at 1,528 of all things….


  34. Phil very good comment on BA. Still discussed the matter today and feel the fall out will be much greater especially in confining in the company as such. Still remember your remarks in one of our discussions when you said " wait until an engine falls off!!!! Now we have two planes falling out of the sky.


  35. Nasdaq Comp not red – still up 25, it's the 100 (/NQ) that's red thanks to AAPL so today's fizzle is really not a broad-based thing – wouldn't get any bearish hopes up on it.

    BA/Yodi – It's goulish but true, statistically, something bad will eventually happen and THAT is when you want to buy.  True for a lot of companies like cars with recalls or food poisoning at CMG or oil spills or drugs that fail – there will always be opportunities if you are simply patient enough to wait for them.  


  36. QCOM wins this round, but the battle isn't over.

    After all is said and done, the two companies will probably sit down and hammer out an agreement.

    Minus the millions and millions of legal fees, of course.


  37. Lawyers always win.


  38. This QCOM/AAPL thing could bring some interesting questions – I assume that courts won't decide that QCOM cannot collect on these patents because even AAPL does enforce patents strongly. As Albo suggest, they'll probably settle on lower rates for licensing and avoid a long protracted fight. 


  39. It's already a long, protracted fight.  



  40. What Happens if Obamacare Is Struck Down?







  41.  737 Boeing Max

    Interesting to get some pilots take on the while mess . The Max is a derivative of the 737 line with an important difference . The Max is fitted with turbofan engines . The older 737s are fitted with turbojet engines . As you may know the turbofan engines are huge in relation to the size of older conventional jet engines . The problem is they wont fit on a 737 in the old engine location as they would hit the ground . So Boeing , to avoid redesigning the whole plane created an extension of the motor mounts way forward and increased the landing gear height a bit so the engines would fit . There is good reason to use the turbofans as they are a modern , fuel efficient engine . If you remember your high school physics consider the engine as being mounted on a lever attached to the wing .The longer the level the greater the rotational forces would be on the wing . So when power is applied to the engines the lever effect is greater the further the engine is from the center line of the wing , further forward more lever . Applying power will tend to pitch up the nose .

    So Boeing puts this plane in the new configuration together and realizes they have a stability problem . Power on would rotate the nose up , increasing chances of a stall . Wings can only produce lift to a certain point nosing up and beyond that the wings stall and very bad things happen . Boeing , knowing this is a problem , creates MCAS software solution ( cheaper by several billion ) rather than creating a new class of planes. The software was to overcome the potential for stall with the new engines .

    This is the focus of attention now . What also may be a contributing factor in all this as Boeing was allowed to self certify the plane design and not required to have the FAA do the normal course certification . Congress decided a few years ago that Boeing should be allowed to self certify ( a whole shit show of discussion will be coming out about that decision) . 

    So I guess the point of all this is I am staying away from Boeing stock at the moment . If it turns out that the MAX is fundamentally less safe that other aircraft due to its design , hot rodding new engines on an old air frame design ,and the patch of software there is a whole world of pain ahead . .


  42. 2a3tube

    Thanks for the great tech write up. As I said before the stigma says. Do not buy the stock and do not board that plane. Still can not understand that Boeing left out the simple switch to change form auto to manual for all the poor people who had to die before the pilots could read the manual book.




  43. Electrical fire darkens much of Fort Lauderdale, Florida






  44. Good morning!

    Thanks 2a for that in-depth view, much appreciated.  This is the sickness of Capitalism and our political system:  Unfortunately, to save a few Billion out of a couple of Trillion in potential sales, BA cuts corners and puts out a plane that is fundamentally unsafe unless aided by a software patch which, in turn, relied on a single sensor and itself turned out to have a fatal bug in it.  To save more money, they spent Millions of Dollars lobbying Congress to have the FAA stop making sure their planes were safe.  

    Oh and, by the way, they had other systems that could have averted the crash – but they were optional extras.  Protecting the lives of consumers is an optional extra these days and the board of BA and the boards of several other airlines decided we just aren't worth the cost…

    Indexes down this morning over bond worries – back to yesterday's lows.