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Fantastic Friday – Pre-Market Boost Turns the Week Positive

At 4am the week turned positive in the Futures.

A bit later, it was announced that Chevron (CVX) was buying Anadarko (APC) for $33Bn AND CVX will spend another $5Bn buying back 2% of their own stock.  That's pumping up the energy sector into earnings season as APC is getting a 44% premium to yesterday's close, which is an indicator that the energy sector stocks may be underpriced by quite a bit or it's simply a play to capture Natural Gas assets (/NG), which we are long on.

In our Long-Term Portfolio, we have an aggressive position on Chesapeake (CHK), which we thought was very undervalued at $2.50 and our net $0 position is already up $3,425 but still has plenty of room to grow as it pays $15,000 at $5 so a potential triple from here if all goes well:

CHK Short Put 2020 17-JAN 4.00 PUT [CHK @ $3.33 $-0.07] -50 1/8/2018 (280) $-6,000 $1.20 $-0.18 $-0.95     $1.02 - $900 15.0% $-5,100
CHK Long Call 2021 15-JAN 2.00 CALL [CHK @ $3.33 $-0.07] 50 2/15/2019 (644) $6,000 $1.20 $0.51     $1.71 $-0.02 $2,525 42.1% $8,525

CHK has 1.5Bn barrels of oil equivalent reserves, 80% of which is /NG, which is the same as APC but you can buy CHK for $5Bn – as long as you are willing to assume their $9Bn in debt but still, $14Bn is a lot less than $33Bn so we are loving our CHK position!  CHK is also a position in our Options Opportunity Portfolio – with postions we published over at Seeking Alpha

CHK Short Put 2020 17-JAN 4.00 PUT [CHK @ $3.33 $-0.07] -25 1/8/2018 (280) $-3,000 $1.20 $-0.18 $-0.65     $1.02 - $450 15.0% $-2,550
CHK Long Call 2021 15-JAN 1.00 CALL [CHK @ $3.33 $-0.07] 50 12/26/2018 (644) $7,450 $1.49 $0.91     $2.40 $-0.10 $4,550 61.1% $12,000
CHK Short Call 2021 15-JAN 3.50 CALL [CHK @ $3.33 $-0.07] -30 12/26/2018 (644) $-1,950 $0.65 $0.34     $0.99 $-0.09 $-1,020 -52.3% $-2,970

The OOP is a smaller portfolio than the LTP, having started with $100,000 on Jan 2nd, 2018, so we took a more conservative position with a conservative target we've already hit.   Still, the cash outlay here was only $2,500 and, at $3.50, it pays us back $6,250 and, as you can see, we've already gained $3,980 though we do have 20 calls uncovered – so we could do better over $3.50. 

As a new trade on CHK, I would go with:

  • Sell 20 CHK 2020 $4 puts for $1.02 ($2,040)
  • Buy 50 CHK 2020 $3 calls for 0.85 ($4,250)
  • Sell 50 CHK 2020 $4.50 calls for $0.30 ($1,500) 

That nets you into the $7,500 spread for net $710 so $6,970 (956%) upside potential if CHK is over $4.50 in Jan 2021 but, if they get bought sooner, you can collect in full at the close.  Because we sold some puts to offset the cost, we risk being assigned 2,000 shares of CHK at $4, which is more than it currently trades for so this is an aggressive play and the ordinary margin requirement on the puts is about $4,000 – so it's still an efficient way to make $6,970 if all goes well.

We survived this week's data and we have some bank earnings today and JP Morgan (JPM) already announced a beat and that Dow component is up 2.5% so now Bank Stocks and Energy Stocks are heading higher.  I don't think we're out of the woods yet and we'll once again be taking some of our ill-gotten gains and adding more hedges.  

1,595 is a good spot to short the Russell (/RTY) Futures but very, very tight stops above 1,600 – as that would be a clear break-out.  Yesterday's Silver (/SI) play hit our $14.90 target and popped back to $15, where we took our $500 per contract profit and ran into the weekend!  2,910 on the S&P  (/ES) is also a good shorting line.

Last Tuesday (2nd) we went over our hedges in the Morning Report and those trades are cheaper now than they were then but I couldn't sleep over the weekend without them protecting our portfolios.

Have a great weekend,

- Phil

 


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  1. Gonna have to add more lines this weekend! Warning – each time I talk about adding more lines, we don't need them months later!




  2. Good Morning!


  3. Chevron Buys Anadarko in $33 Billion Bet on Shale Oil, LNG



  4. Good morning! 

    I guess we do need a bigger Big Chart (again).  As StJ notes, we never quite get there but WOW, up 230 at the moment on /YM

    DIS is a big Dow booster this morning, up $12 is 100 Dow points right there.  That's up 10% or the entire market Cap of CBS!

    Make that 260 points….

    We have short DIS calls in the Butterfly and LTP:

    DIS Long Call 2020 17-JAN 92.50 CALL [DIS @ $116.60 $0.00] 15 3/16/2018 (280) $31,050 $20.70 $5.48 $15.33     $26.18 $0.00 $8,213 26.4% $39,263
    DIS Short Call 2020 17-JAN 110.00 CALL [DIS @ $116.60 $0.00] -15 3/21/2018 (280) $-17,100 $11.40 $1.38     $12.78 $0.00 $-2,063 -12.1% $-19,163
    DIS Short Put 2019 18-APR 115.00 PUT [DIS @ $116.60 $0.00] -5 1/18/2019 (6) $-2,925 $5.85 $-4.68     $1.18 $0.00 $2,338 79.9% $-588
    DIS Short Call 2019 18-APR 115.00 CALL [DIS @ $116.60 $0.00] -5 1/23/2019 (6) $-1,600 $3.20 $-0.37     $2.84 $0.00 $183 11.4% $-1,418

    $130 on DIS means we owe back $15 but only 1/3 cover.  The June $125s are $8 so a 2x roll there is our likely out but we'll also have to buy some more longs, I think.  Does not reflect our adjustment, which helps a bit:

    • DIS – Right on track and this is a $26,250 spread currently priced at net $16,420 so $10,000 more to make on the spread but we're also collecting over $3,000 per quarter in premium for a potential $18,000 more over the next two years so this one's a keeper!  Actually, the 5 2020 $90 puts are mostly dead at $1.50 so let's buy those back ($750) and sell 10 2021 $100 puts for $6 ($6,000) because I'm very confident DIS is worth way more than $100.

     

     

    DIS Short Put 2020 17-JAN 95.00 PUT [DIS @ $116.60 $0.00] -10 4/27/2018 (280) $-8,000 $8.00 $-6.51 $-12.46     $1.49 $0.00 $6,510 81.4% $-1,490
    DIS Short Call 2021 15-JAN 140.00 CALL [DIS @ $116.60 $0.00] -25 10/19/2018 (644) $-23,750 $9.50 $-3.28     $6.23 $0.00 $8,188 34.5% $-15,563
    DIS Short Call 2019 18-APR 115.00 CALL [DIS @ $116.60 $0.00] -20 11/19/2018 (6) $-14,000 $7.00 $-4.17     $2.84 $0.00 $8,330 59.5% $-5,670
    DIS Long Call 2021 15-JAN 110.00 CALL [DIS @ $116.60 $0.00] 25 1/22/2019 (644) $38,750 $15.50 $3.08     $18.58 $0.00 $7,688 19.8% $46,438

    Fortunately, does not reflect this change from last month:

    • DIS – What a year they are going to have at the box office!  We're on track with a lot of room to run.  My only worry is they spike up so let's buy back 1/2 the April $115 calls for $2.45 ($2,450)

    So LTP is pretty much in the same boat and this is a double-dip play as we already cashed in our first long set.  I'll have to consider how we adjust but no hurry, we'll see what sticks next week.

    Up 280 points!


  5. Phil/DIS

    I have (9)2020 100/120 BCS and (6) 2021 105/120 BCS, with (3) June 110 puts sold and (2) June 115 calls sold.  The news of DIS new “Netflix-like” programming for $6.99 has got the stock near $130.  All is good, but what can I do with those sold calls?  Thank you.


  6. Germany to halve 2019 growth forecast: government source


  7.  Phil / CHK – the prices for the new trade above are for 2020 options, is that what you meant and not 2021? Thanks


  8. DIS/DC – I wouldn't worry, you have 15 longs and just 2 short calls, I'd roll them to 4 of the June $125s, which have already calmed down to $7 and those can roll to 8 of the Sept $135s, which are $4 and the Jan $145s are $3.20 so those are your rolls for the year and you'd still only be 1/2 covered. 

    People believe DIS will get 100M people to give them $80/year ($8Bn) – that would be nice but how many services can we really subscribe to.  Shorting NFLX seems like the move as DIS is lowering the price bar considerably but I would have to pry NFLX from my kids' cold, dead hands…

    Our last NFLX play was way back last Aug:

    Alternatives/Alter – Well, I'm sure you can trade the futures, that's one way.  Also, is there not a broker that lets you trade US securities?  SPY may not be compliant but that doesn't mean SDS is not – not sure what alternatives you've tried.  You can also hedge using stocks with high beta correlations or stocks that are just stupidly expensive like NFLX as a Nasdaq crash would almost certainly take them down too.  

    So, for example, let's say we were trying to protect a $200,000 portfolio from a 10% drop in QQQ which would likely cost you 20% ($40,000) if you have a lot of leveraged positions.  So you want to mitigate at least 1/2 the damage and let's see how we can do that with NFLX.

    By the way, you can also find a bearish hedge fund that makes money in down markets – they have those too.  

    • Sell 5 NFLX March $400 calls for $19 ($9,500)
    • Buy 10 NFLX Jan $360 puts for $37.50 ($37,500) 
    • Sell 10 NFLX Jan $330 puts for $22.50 ($22,500)

    That's net $5,500 on the $30,000 spread that's half in the money at the moment and NFLX is almost 20% away from $400 so very unlikely to cost you money on short calls unless the Nas is blasting higher and anything down will pay you back $24,500 in profits to offset the long losses in the index. 

    It's not perfect and, of course, NFLX can strangely benefit from an event so it's best, in a larger portfolio, to spread the targets around but this is a good example of something you can use as a hedge instead of hedging the indexes.  

    A similar trade now would be:

    • Sell 5 NFLX Jan $450 calls for $20 ($10,000) 
    • Buy 10 NFLX Sept $430 puts for $82($82,000) 
    • Sell 10 NFLX Sept $400 puts for $60 ($60,000)

    That's net $12,000 on the $30,000 spread, not as good but NFLX has to be over $418 before this one hurts you – that's up 20% from here.  Anything below $400 make $18,000 (150%) in 6 months. 

    Good pullback on /RTY already, /ES is the fresh horse, right at 2,910 still.


  9. CHK/Bai – Well if that's 2020, it's fine with me – good catch, thanks.  2021 would be:

    • Sell 20 CHK 2021 $4 puts for $1.35 ($2,700) 
    • Buy 50 CHK 2021 $2 calls for $1.65 ($8,250)
    • Sell 50 CHK 2021 $3.50 calls for $1 ($5,000) 

    I went for the more conservative spread here because the price is so good and, regardless of how bullish I am, I'd still rather have the easier target.  This one pays $7,500 on the net $500 spread so it's actually a bit better with $7,000 (1,400%) upside potential at just $3.50 but you need $4 to make that last $1,000.


  10. NFLX / Phil – Valuation is nuts, but I think that they would be tough to kill! I speak to people in many countries each day and it's amazing how many people have Netflix. The local content is growing fast as well and that makes a difference. 

    But you are right, how many services can you subscribe to – Netflix, Hulu, Amazon Prime, CBS (for Star Trek), now Disney! It's getting more expensive than my cable bill. I guess the future is devices like Roku, Chromecast, Apple TV and you get apps for news channel, science channel and so on and streaming for movies and series. No more cable bundles – only Internet services.


  11. Hello Phil and the Gang.  SIG getting really beaten up.  Anyone know why?  Thanks.


  12. silver back to 15,00


  13. Herr professor Davis – what is the best way to protect a million dollars against a 40% market drop some time in 2019 and the same for protecting against a spike in interest rates for rate sensitive stocks?  Is there one hedge that would be good for both?


  14. Phil,  I feel like I've been pretty negligent.  I have 12 short DIS calls expiring today at 120 and 121, and 4 120s, 2 121s, and 2 122s expiring next week.  I knew that DIS was having a streaming event, but only half paid attention since I figured that Disney's streaming intentions were pretty well-known, especially with the Fox acquisition on board.  And Dis tends not to be a huge mover…  

    I have the following DIS spreads 12 Jan 20 DIS 85/95, 10 Jan 20 90/95, 10 Jan 20 90/97.5,  12 Jan 20 90/120s, 2 Jun 20 95/110, 18 June 20 100/110, 4 Jan 21 100/110, 6 100/115, and 23 105/115.  (By the way, I know that I should close out the deep in the money spreads but closing trades will not execute unless I give way too much away.)

    I have to roll today and sell some more premium and I am trying to figure out a smart way to do it.  Any guess regarding how much DIS is likely to retrace today?  Any thoughts on rolls would be very much appreciated.  Thank you. 


  15. Thoughts about going back into /NG?  /NGv19 is back to $2.80.


  16. NFLX/StJ – It's not about losing subscribers, it's about not being able to raise rates while costs rise as they have to compete for content with – EVERYONE.  I've said forever they should be valued like a studio or production company but they are still priced like they will triple in size – that's just not going to happen.  

    Sig/Robert – They beat by 0.15 last week and still not good enough, I guess.  It's a restructuring year and you have to be patient with them (nice dividend while you wait).  They are pulling out of low-traffic malls so closing 200 stores this year and opening 180 new stores and that's out of 2,000 stores – so this will take a while….

    In the LTP, we sold the SIG 2021 $20 puts for $5.50 and they are still $5.50 so good for a new trade but it will be a rough ride and we haven't been motivated to add a bull call spread yet.  

    /SI/Tommy – What a ride on that one!

    Whee on /ES!  

    Hedging/Tangled – I think that, with the massive level of Corporate Debt in the S&P 500, that an S&P short will work in both cases.  Also, you should hedge what you have, not what you think might go down so, if you have S&P longs, use S&P hedges, etc.  If you have $1M in REITs, you might want to hedge with a REIT ETF but not all, maybe 1/3.  

    VNQ is well-optioned and very liquid and is up 10% since last year for no good reason.  If you are up 10% ($100,000) you can take a hedge with the 2021 $85 ($6.50)/$75 ($3.25) bull call spreads at $3.25 and those pay 3:1 on a 20% drop and, of course, you can offset the cost by selling calls against your longs.  VNQ 2021 $90 calls are $4.20 and I'm not saying to sell them (you sell what you have to be called away) but, as an example, if you sold one of those for each 2 of the spreads, the net cost would be $2.30 so $23,000 would buy you 100 put spreads that would pay $100,000 on a 20% drop.  

    As to a 40% drop, there's no magic way to hedge against it.  If we drop 10% ($80), your first hedge goes $50,000 in the money and you take another $25,000 and buy another $100,000 in protection and, if you do that each 10%, you have $400,000 worth of protection on a 40% drop.  We assume the brakes on the market kick in but, if NYC gets nuked – you're probably out of luck (with the rest of us) – there are no magic beans.  

    Realistically, if you have $1M in play and you are worried about a 40% drop, take $500,000 off the table and now it costs a lot less to hedge.  Spending the kind of money you need to offset a 40% drop would logically cost you $100,000+ and that's money you will LOSE if the market goes up so a 20% gain becomes a 10% gain which is why it's smarter to cut back the bets and keep more cash on the side as a 20% gain with a less-hedged $500,000 pays the same $100,000 (maybe $75,000) you would have made if you had to hedge $1M against such a wild swing.  

    Logically, with the above $23,000 hedge, you mitigate 1/2 of a 40% loss of your $500,000 and then you have have another $500,000 on the side to double down with on stocks that are 40% cheaper – that's the smart play!  

    DIS/John – I agree, it's an over-reaction but at least you have plenty of longs.  Looks like 18 short calls around $120 and DIS at $127.50 is already calming down. Looks like you have 100 longs and I can't even imagine how you keep track of that mess or why you have such a messy set of positions.  Today is going to be hard to fill as all the short calls have silly premiums.  This is why I don't screw around with weekly or even monthly calls – what a nightmare!  

    As a rule of thumb, I'd roll ALL 100 long calls to June 2021 $115 calls at $26, which should be quite a bit less than you can sell the longs for.  Then I would work on rolling the 118 short calls to maybe 60 short June 2021 $135s ($16) and your Jan $95s, for example, are $34 so 40 will cost you $14 to roll and the Jan $110s are $27, so $10(ish) to roll those so $75,000 for 60 rolls and the rest you can put in something like 40 Sept $110s at $20 so you have 100  spreads, fully covered and 60 of them are $20 spreads ($120,000) and the other 40 hopefully you''ll be able to roll to higher strikes over time.

    I wouldn't sell puts from this height but if DIS does drop $20, it's a jackpot as the short puts go worthless and then you can sell puts to pay for rolling the long $115s to the $105 (no more than $6, hopefully $5) and then you'd have $180,000 worth of spreads with 40% uncovered.  Keep in mind your worst case is DIS does not go lower than $128 and your roll the 40 Sept $110s to Jan $115s ($18) and June 2020 $120s ($18) and 2021 $125s ($18) – so that's another $40,000 spread on that set would be the worst upside case.  

    Meanwhile, you're very well-protected against a pullback.

    /NG/Options – I always like /NG down here and last April was a bottom around $2.50 so $2.65 is attractive but could get worse so, especially into the weekend, make sure you don't mind laughing off a $1,500/contract loss if we spike lower.  

    Below $2.50 I would give up because look at 2016!

    I took a $40,000 loss on that one but then caught a $120,000 move up and netted $80,000 (and an ulcer!).  


  17. Oil hit $64.50 again and failed again.  

    /RB can't seem to get back up.   Almost tempted to go long with Easter next week.

    I guess the feeling on /NG is that CVX and others are going to crank up production.

    /KC looking more like a weak bounce – not worth the weekend risk unless you're in for the long haul.


  18. The Psychology Behind Unethical Behavior



  19. As cashless stores grow, so does the backlash


  20. /ES 2,910 again for the short!


  21. And Disney puts out a new Star Wars trailer – they are really bringing it on today!

    • Gainers: Anadarko Petroleum (NYSE:APC+33%. Parsley Energy (NYSE:PE+13%. Pioneer Natural Resources (NYSE:PXD+11%. Callon Petroleum (NYSE:CPE+11%. Concho Resources (NYSE:CXO+10%.
    • Losers: Petrobras (NYSE:PBR-8%. National Oilwell Varco (NYSE:NOV-7%. Energy Fuels (NYSEMKT:UUUU-6%. Key Energy Services (NYSE:KEG-6%.
    • Morgan Stanley analyst Adam Jonas thinks the string of mega-alliances in the automobile industry could lead to a downstream impact on suppliers as company look to pool insourcing capabilities.
    • In just the last few months alone, there has been collaboration news from Ford (NYSE:F) and Volkswagen (OTCPK:VWAGY) on EVs and AVs, General Motors (NYSE:GM) and Honda (NYSE:HMC) on AVs and complete vehicle design, Daimler (OTCPK:DDAIF) and BMW (OTCPK:BMWYY) on AVs, Daimler and Geely on developing the smart brand, Toyota (NYSE:TM) and Panasonic on energy storage – as well as Fiat (NYSE:FCAU) and Tesla (NASDAQ:TSLA) on emissions pooling of vehicle fleets.
    • "We expect pressures on OEM margins and efforts to reduce costs may challenge conventional market thinking around content growth opportunities for suppliers, leaving earnings forecast at risk," warn Jonas and team.
    • As more theme-focused exchange-traded funds come to market, the Securities and Exchange Commission is taking a closer look at the funds' names to make sure they're not misleading potential investors, Bloomberg reports.
    • Thus, an increasing number of ETFs are changing their names before they launch. For example, one Amplify fund that originally included blockchain in its name now calls itself a "transformational data sharing" ETF.
    • In 2001, the SEC adopted Rule 35d-1--or Names Rule--that says at least 80% of assets in the fund must be of the type suggested by the fund's name.
    • In another example, a Pacer ETF originally called Best for Vets Equity ETF was changed to Military Times Best Employers ETF after the SEC objected to the first name.
    • In some cases, ETF funds are using ticker symbols to get their point across. The Pacer ETF uses the ticker VETS, and the Amplify blockchain ETF uses the symbol BLOK.
    • The German government halved its 2019 forecast to 0.5% from 1.0% due to weaker exports in the wake of global trade tensions and expects GDP growth of 1.5% in 2020, partly because of positive calendar effects from four public holidays falling on weekends.
    • Germany's leading economic institutes last week also revised down their 2019 growth forecast to 0.8% from a previous estimate of 1.9%.
    • Germany's economy is facing headwinds from a slowing world economy, global trade disputes and the threat of Britain leaving the European Union without a deal.
    • Financial stocks power up as the first crop of Q1 bank earnings come in stronger-than-expected, for the most part.
    • Among S&P 500 industry sectors, financials are in the lead, rising 1.8% in early afternoon trading in New York.
    • Financial Select Sector SPDR ETF (NYSEARCA:XLFadvances 1.8%, while the SPDR S&P Regional Banking ETF (NYSEARCA:KRE) also gains 1.8%.
    • JPMorgan Chase (JPM +4.6%) helped kick off earnings season with an impressive beat that reflected the strength of its consumer and community banking operations.
    • Morgan Stanley (MS +4.4%), Bank of America (BAC +3.3%), Goldman Sachs, (GS +2.3%), and Citigroup (C +2.4%) also ride the wave.
    • The exception, Wells Fargo (WFC -2.6%), falls after its CFO issued disappointing guidance for net interest income.
    • The first regional bank to report, PNC Financial (PNC +3.3%), is getting the biggest boost in that group. Other gainers include: Comerica (CMA +2.7%), KeyCorp (KEY +2.4%), Huntington Bancshares (HBAN +2.3%), Regions Financial (RF +2.3%), and Fifth Third Bancorp (FITB+2.2%).
    • The total count of active drilling rigs in the U.S. falls by 3 to 1,022, resuming a pattern of declines following last week's one-time surge of 19, Baker Hughes reports in its latest weekly survey.
    • The oil rig count gained 2 to 833 after jumping 15 last week but gas rigs fell 5 to 189.
    • WTI crude oil +0.9% to $64.14/bbl, little changed from before the rig data.
    • General Electric (NYSE:GEagrees to resolve claims involving subprime residential mortgage loans originated by its WMC Mortgage subsidiary before the financial crisis.
    • WMC and GE allegedly misrepresented the quality of WMC loans and the extent of its internal quality and fraud controls regarding the marketing and sale of residential mortgage-backed securities, the U.S. Department of Justice said.
    • GE Capital bought WMC, a subprime residential mortgage loan originator in 2004. The unit originated more than $65B in mortgage loans between 2005 and 2007.
    • WMC sold most of its loans to investment banks, which, in turn, issued and sold RMBS backed by WMC loans to investors.
    • "Investors, including federally insured financial institutions, suffered billions of dollars in losses as a result of WMC’s fraudulent origination and sale of loans for inclusion in RMBS," the DOJ said in a statement.
    • Sociedad Quimica y Minera de Chile (SQM -0.4%) will exceed its sales target of just under 50K tons of lithium as production ramps up at its operations in the Atacama salt flat, says the company's commercial VP of lithium Felipe Smith.
    • SQM nearly doubled its lithium production capacity in 2018 to 70K mt/year to respond to booming demand, but the company's shares posted the biggest decline in more than a year in February after reporting disappointing Q4 results and projecting lower than expected sales volumes.
    • "Every ramp up has a lot of hiccups and adjustments we need to do," Smith tells Bloomberg. "We feel now we are in a better position to start looking for additional volume in terms of sales and this is our goal – we hope to exceed the initial sales plan."
    • Lithium producers generally have struggled to respond to a trend that is expected to result on the market growing from ~300K tons to 1M tons by 2025.
    • China's auto sales fell 5.2% in March to 2 .52M vehicles, smallest since August 2018 as car makers reduced retail prices to boost business after Beijing handed out tax cuts to spur consumer spending.
    • Assistant secretary general at CAAM, Xu Haidong expects and hope to see the turning point appear in around July and August
    • In 2018, China's car market hit reverse for the first time since the 1990s against a backdrop of slowing economic growth and a crippling Sino-U.S. trade war.
    • Greenlight Capital's David Einhorn writes about Tesla (TSLA -0.4%) in the firm's quarterly letter to clients.
    • Greenlight is short Tesla and needless to say Einhorn hit on some of the bear camp's favorite themes (quality issues, management crisis, new EV competition) in the letter before diving into the impact of price cuts on Tesla's leasing program and new car sales.
    • "When TSLA cars come off lease, TSLA appears to be reluctant to resell them, as used Model S’s and X’s compete with new Model 3’s, which have their own demand problems. Used Model S’s and X’s appear to be piling up in parking lots across the country," writes Einhorn.
    • He notes Tesla is still guiding to quarterly demand of about 100K to 115K cars for the balance of the year. "We don’t see what can possibly drive that much demand. In fact, we suspect that without initial surge demand elsewhere, TSLA will struggle to even maintain first quarter unit volumes," he warns.
    • Shares of Tesla are down 11% over the last 52 weeks, during which time Greenhorn has been locked in a short position. Einhorn and team took a serious crack at GM a few years with a heavy long position and advice for a share class split, but barely mentioned the Detroit automaker in today's letter – even with its remaining position showing a tidy gain in Q1.

    • GrubHub (NYSE:GRUBdrops 6.5% after Uber's IPO filing outlined the performance and potential of rival Uber Eats.
    • Uber Eats metrics from the filing (for the quarter ending December 31): Average delivery time, 30 mins; MAPCs receiving an Eats meal, 15M of the 91M total; Network, more than 220K restaurants in over 500 cities.
    • Uber Eats gross bookings last year totaled $7.9B.
    • JPMorgan Chase (JPM +4.1%) CEO Jamie Dimon told journalists on a call that the bank's entry-level salary of $35,000-$37,000 with medical and retirement stacks up pretty well against other industries.
    • "When you're looking at wages, you better look around at other people," he said. "The banking industry is pretty good."
    • JPMorgan pays a minimum of $16.50 per hour, rising to $18 in major cities, he said.
    • In Friday's call, he asked reporters from the New York Times and CNBC how much their employers pay entry-level workers.
    • The comments come after CEO was challenged by Rep. Katie Porter (D-CA) at Congressional hearings on Wednesday, who said a minimum-wage worker at JPMorgan couldn't cover her monthly expenses.
    • Previously: Jamie Dimon's 2018 compensation totaled $31M, topping pre-crisis record (Jan. 17)
    • Seeking to ease a subsidy payment backlog, China's energy regulator says it will prioritize the construction of wind and solar projects that can operate without subsidies this year and will cap new subsidized capacity.
    • After studying local conditions, China’s National Energy Administration says it wants regional energy bureaus to give priority to the construction of wind and solar plants with grid price parity, and calls on local authorities to be more rational when approving new capacity, especially for offshore wind power development.
    • The agency has set total subsidies for solar projects in 2019 at 3B yuan.
    • Same-store restaurant sales rose 1.2% in March in a return to positive growth, according to tracking conducted by TDn2K.
    • Average spending per guest rose 3.0% to offset a 1.8% drop in same-store traffic.
    • Same-store restaurant sales were up 1.0% for Q1 to mark the fourth consecutive quarter of positive SSS growth.
    • TDn2K breakdown: "The sector is going through its longest period of sales expansion for comparable stores since 2015. We have been seeing signs that point toward a longer-term recovery as well… The best performing segments were those in the limited service category: quick service and fast casual. Both had strong sales growth during the month and the first quarter of the year. Casual dining and upscale casual round up the list of segments with positive sales growth during March."
    • Wells Fargo (NYSE:WFCfalls 2.2% after the its CFO told analysts in a call that the bankexpects net interest income to fall 2%-5% this year vs. the prior expected range of down 2% to up 2%.
    • CFO John Shrewsberry cites factors such as "lower absolute rate outlook, a flatter curve, tightening loan spreads resulting from a competitive market with ample liquidity, and continued upward pressure on deposit pricing."
    • Previously: Wells Fargo Q1 NII reflects fewer days, flatter yield curve (April 12)
    • Chesapeake Energy (CHK -1.8%) and California Resources (CRC -2.8%) are not enjoying this morning's broad energy sector gains, as Goldman Sachs downgrades both names to Sell from Neutral.
    • In cutting CHK, Goldman sees "less favorable competitive positioning on supply cost [and] corporate returns vs. peers and believe balance sheet improvement is still warranted" following the WildHorse acquisition.
    • The firm notes CHK shares have climbed 19% since completing the WRD deal on Feb. 1.
    • Goldman also downgrades CRC to Sell, noting the company's low decline rate and competitive supply cost but unfavorable debt cost that does not warrant the stock's current valuation premium.
    • On the flip side, the firm upgraded Murphy Oil (MUR +4.1%) to Neutral from Sell and recommends buying "low cost oil suppliers" Encana (ECA +4.2%), Parsley Energy (PE +9.5%), Pioneer Natural (PXD +10.6%) and EOG Resources (EOG +4.7%).
    • The FCC plans its broadest airwaves auction yet, in what it hopes will be a spur to 5G development, and will announce a $20B fund for rural broadband deployment.
    • Chairman Ajit Pai will formalize the announcements at the White House later today.
    • The agency had previously previewed plans to auction 37 GHz, 39 GHz and 47 GHz millimeter wave spectrum at some point; now it will likely set that sale to begin Dec. 10.
    • Those auctions would join two current auctions, for 24 GHz and 28 GHz spectrum. And still on the table is a plan pushed by the C-Band Alliance (led by Intelsat (NYSE:I) and SES (OTCPK:SGBAF)) to reallocate satellite spectrum for use by 5G operators.
    • Also getting a formal OK will be the Rural Digital Opportunity Fund, which reallocates existing subsidies to providing broadband to up to 4M unserved homes. It will provide incentives for fiber route building, either for direct service or to provide a 5G backbone.
    • Whirlpool (WHR +0.6%) is on watch after Cleveland Research lowers estimates on the appliances manufacturer.
    • The research firm warns on soft Q1 shipment volume, per Bloomberg. Whirlpool is expected to report earnings around April 22.
    • Shares of Whirlpool are up 31% YTD.
    • Federal Reserve Chairman Jerome Powell stressed to Democratic lawmakers Thursday evening that he sees his role as apolitical and values the central bank's independence, the Wall Street Journal reports, citing those who heard him speak at the closed-door party retreat.
    • Powell has been repeatedly criticized by President Trump for raising interest rates last year, a move that Trump says hurts the economy and stock markets.
    • The Fed chair wouldn't discuss Trump's choices of Herman Cain and Stephen Moore to fill empty seats on the Federal Reserve Board.
    • He also urged lawmakers not to consider defaulting on U.S. debt when the debt limit needs to be raised later this year. Powell "said it's unthinkable that we wouldn't pay all of our obligations full and on time," Rep. Jim Himes (D-CT) said.
    • Previously: Trump to Fed's Powell: "I guess I'm stuck with you" (April 3)
    • April Consumer Sentiment 96.9 vs. 98.0 consensus and 98.4 prior.
    • Current economic conditions 114.2 vs. 112.5 consensus and  113.3 prior.
    • Index of consumer expectations 85.8 vs. 88.5 consensus and 88.8 prior.

  22. Phil – Margin question

    I have 3 CMG short 780 calls 2021 which I am not worried about but TDAM has a margin requirement of $54,000 on them which is a big chunk.  Any way to offset that?


  23. Phil / CHK – which companies do you think would be buying CHK?


  24. CMG/Coulter – Yeah, that's a lot to tie up – seems extreme actually.  About $18,000 each is $180 but it would cost you $65 to cover with the $900s – hardly worth it.  You could sell puts, that would offset a bit but, of course, I'm sure you don't believe in the short puts.  Sorry, not seeing a good way to offset it.

    CHK/Batman – Well OXY apparently bid more for APC than CVX did but APC liked CVX better – there's one…  Once M&A starts flying – it's a race and all the big guys will play.

    No selling into the close – quite the finish to the week.


  25. Phil / CHK Thanks – I have not looked at the industry in general – but did look at CHK pretty hard a few years ago, when they were expanding operations in the gulf….  They have great infrastructure and pretty good execution ( or management of the bring up of facilities as they outsourced all of it) but they carry a lot of debt.  They've had a pretty good pop recently as well…. probably having something to do with buyout.


  26. CHK/Batman – They used to be great under Aubrey (old CEO) but have had trouble finding their footing since. 

    Oil back to $63.75, that's enough for me to have a good weekend.   Back in the command center next week!

    Have a great weekend everyone, 

    - Phil


  27. Phil  Are there specific tech stocks you are watching that could contribute to a downturn in the NAS?


  28. China’s auto show highlights electric ambitions









  29. Trump White House braces for full Mueller report