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Terrific Tuesday – Futures Blast Higher Just Because

Incendie dans la cahtÃ?©drale Notre-Dame de Paris, le lundi 15 avril.Wheee, up 180! 

Why?  Literally, there is no reason that the Dow is up 0.666% this morning in the Futures.  The other indexes are up 0.4% and mostly we popped higher at the EU open (3am).  There are no reasons for this and we don't need any reasons – there were no reasons in 1999 or 2007 as the market plowed higher – even as some were warning of dire macro events that were clearly visible just around the corner.  The markets tend to march on until the changes are long past undeniable, kind of like our President

All eyes were on France yesterday as Notre Dame had a tragic fire, destroying a large part of one of the World's greatest architectural wonders.  Victor Hugo said Notre Dame is a work of art authored by humanity itself, with no individual artist. It surpasses anything an individual can do and therefore becomes the best of what all of us can do – it's loss is a great tragedy and already hundreds of Millions of Dollars have been pledged to rebuild it. 

When Hugo Wrote "The Hunchback of Notre Dame" the church had already been destroyed during the French revolution and his novel called enough attention to it that it underwent a great rebuilding program in the mid-1800s so, almost 200 years later – we're just repeating the cycle – hopefully with less wood this time!  In truth, there's not all that much left of the original, built in 1163. 

Image result for notre dame floodSo, while we may see it rebuilt and think "it's not the same" – our great, great, great grandchildren will probably see it as an achitechtural classic once again – providing we do something about Global Warming, which came within 3 feet of breaking over the embankments during the 2016 Paris Flood.  

As there is not much news today, it's a good time to kick off our Portfolio Reviews with a look at our public portfolio called the Money Talk Portfolio, which we only trade live on BNN's (Bloomberg Canada) Money Talk Show once per quarter.  I'll be on the show again next Wednesday at 7pm and yes, we will be making changes but, for now, we still have the same positions we had back on Jan 30th, which is the last time we made changes

Back on Jan 30th, we had analyzed our then $105,845 portfolio, which was up 111.7% from our $50,000 base on 9/6/17 and we said we had $152,476 of potential gains less $13,760 we expected to lose on our hedges so call it $140,000 expected to be made by Jan 15th, 2021 (our long expirations) and that means we should be making about $10,000 per month if we're on track – which is not bad for an initial $50,000 portfolio ($10,000 being 20% per month).  

As of yesterday's close, the Mondey Talk Portfolio is up 158% from the start at $128,983 so we've gained $23,138 in 2.5 months – almost exactly on track with our expections.  As I said at the time:

The key to successful trading is having a realistic trading plan and then making sure that plan is successful.  If you are diversified in your positions and if you hedge properly – there shouldn't be any times in which all your positions are losing and that, then, gives you the flexibillity to make adjustments when you need to or, in the case of our Money Talk Portfolio – the ability to completely ignore the market gyrations and simply take stock and make adjustments once a quarter.

You don't need to play a lot to make money – just play smart when you do play! 

I strongly suggest you read over the Jan 30th Review and, next Wednesday, we're going to go over changes and projections on our 10 positions but, for now, they are all doing what they are supposed and, of course, we don't have any options expiring this week (April) – as that would be silly in a portfolio we only adjust once per quarter:

People as if we're going to launch new portfolio (and we will at the end of this year) but here's a "new" portfolio of $105,845 at the start of this year that we told you could make $138,716 by the end of 2020 (actually, that's just $5,779 per month but, of course, we'll add other trades to do better) and here we are, 6 weeks later, up $23,138 – seems as good as new to me!  

These positions, in turn, will double up if all goes well and making "just" 100% between now and Jan 2021 is still a pretty good return – even for our spoiled PSW Members!  That brand new IBM (IBM) trade (our 2019 Trade of the Year, in fact) was only net $650 cash to initiate and is already net $2,408 – up $1,758 (270%) in the first 6 weeks and right on the way to our full $7,500 return if IBM is over $135 (now $144) in Jan, 2021.  That's another $5,092 (211%) that can be made on this trade from this point forward!

The new Caterpillar (CAT) trade was net $6,000 and is now net $7,424 so up about 23% on that one so far but, more importantly, CAT is at $140.25 and our goal is $130 so all we have to do is not go down $10 between now and Jan, 2021 and we will have another 100%+ gain.  In other words, here's a position that can make 100% over the next 20 months – what are you going to do with that knowledge?

Remember:  I can only tell you what is likely to happen and how to make money from it – the rest is up to you!  

 


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  1. Really gonna have to add more lines if this continues!



  2. Corporate taxes are a joke and maybe Libby has a plan:

    https://www.bloomberg.com/opinion/articles/2019-04-15/warren-has-a-good-beginning-for-ending-corporate-tax-avoidance

    It would have been OK to reduce the rate if they had eliminated the loopholes but they kept most of them so no more companies pay no taxes at all! And if I recall, some people were upset that the poorest of us don't pay taxes. But corporations are "people" (right?) and no one gets upset when they pay nothing.


  3. Good Morning!


  4. Make this a very good morning!


  5. Good morning!

    This is the 12th time in 14 sessions we've been green.  That's incredible – as in: NOT credible.  I can't in good conscience keep going long on this BS.  Will make for interesting reviews.  

    Home equity/StJ – And we know how quickly that can evaporate.   I like Liz's plan (or any plan to make Corporations pay their fair share) – hopefully it gains some traction.

    • Dow futures are up 100 points, with the S&P 500 and Nasdaq pointing to gains of 0.4% a s investors await the latest corporate results, including earnings from UnitedHealth, J&J, IBM and Netflix.
    • A notable standout from the overnight session was the Shanghai Composite, which jumped 2.4% on the latest trade optimism.
    • Larry Kudlow, director of the National Economic Council, said negotiations over complaints that China has predatory technology policies were going "very well" and making good progress.
    • As the U.S. and China look to wrap up trade talks, European negotiators have received the green light to start trade negotiations with the U.S. as both sides seek to mend frayed relations after threatening each other with billions of dollars in new tariffs over an aviation dispute.
    • The EU is trying to do its own limited deal with President Trump to address tariffs on industrial goods, in part to avoid levies he has threatened on foreign automobiles and car parts.
    • Japan this week also steps into bilateral U.S. trade talks as Shinzo Abe aims to avoid tariffs or quotas on auto exports and Trump attempts to crack open Japan's agricultural market and reduce a $60B trade deficit.
    • The Fed should shore up its ability to fight economic downturns by committing to let inflation run above 2% "in good times," according to Boston Fed President Eric Rosengren.
    • "My own preference would be an inflation range of 1.5%-2.5%" because hitting the current target will only get harder with rates as low as they are, he said at Davidson College in North Carolina.
    • "Even though we're only missing by a little bit it actually does matter if you miss by a little bit on a regular basis.”

    • March Industrial Production: -0.1% to 110.2 +0.3% consensus, +0.1% prior (unrevised).
    • Capacity Utilization 78.8% vs. 79.1% consensus, 79.0% prior (revised).
    • Chain store sales increased 5.0% pace for the week ending on April 13, according to the latest report from Johnson Redbook.
    • Sales in April are expected to be up 5.4% for the month.
    • Nomura initiates Micron (NASDAQ:MU) at Neutral and a $45 price target citing record GAAP gross margins of 50% to 60% in 2017 to 2018 and says MU will likely remain profitable over the next several quarters as the downturn plays out.
    • But there's still the cyclical risks with DRAM and NAND prices down 28% and 33%, respectively, for January and February.
    • Micron shares are up 1.2% pre-market to $42.32.
    • Investors have warmed back up to tobacco stocks after hearing management say vaping won't cannibalize traditional cigarettes as much as feared, notes The Wall Street Journal's Carol Ryan.
    • Notably, Altria issued guidance for cigarette volume declines of 4% to 5% per year, level with the trend since 2007.
    • "The perennial appeal of big tobacco is its cash generation, which funds big dividends," write Ryan, although she warns that dividend payout increases could be harder to pull off due to investments in new products.
    • On a YTD look, shares of Philip Morris International (NYSE:PM) and British American Tobacco (NYSE:BTI) are both up 29% and Altria (NYSE:MO) is 15% higher.
    • Deutsche Bank lifts Netflix (NASDAQ:NFLX) to a Buy rating from Hold on its view that no other streaming platforms are close to the company's reach.
    • "Platform status brings network effects not available to peers and competitors. Specifically, this is making Netflix even more of a go-to destination when consumers want to watch something, and it means having Netflix is becoming more of a cultural necessity for people around the world," says DB analyst Bryan Kraft.
    • The firm hikes its price target on NFLX to $400.
    • Shares of Netflix are up 1.66% in premarket action after a couple of shaky days of trading following the Disney+ unveiling. Earnings drop later today from the streaming juggernaut.
    • Canopy Rivers (OTCPK:CNPOF) discloses an investment in cannabis beauty brand High Beauty.
    • The company says it has subscribed for $2.5M worth of shares in High Beauty, representing 18.4% of the company on a fully diluted basis, including additional warrant coverage.
    • Canopy River believes that High Beauty has a competitive advantage in the global beauty market through its distribution partnership with Sephora.
    • Canopy Rivers is a venture capital platform for Canopy Growth (NYSE:CGC).
    • CNPOF +0.56% premarket to $40.96.
    • Source: Press Release
    • Bank of America (NYSE:BACQ1 EPS of 70 cents, beating the average analyst estimate of 66 cents, is flat from Q4 2018 and up from 62 cents in Q1 2018.
    • In Consumer Banking segment, net income rose 25% to $3.2B and loans increased 5% to $292B; deposits are up 3% to $697B.
    • Global Wealth & Investment Management net income increased 14% to $1.0B and pretax margin of 29% rose from 25% a year ago loans rose 3% and deposit increased 8%.
    • Global Banking net income increased 2% to $2.0B; loans rose 5% to $370B; deposits up 8% to $349B.
    • Global Markets net income of $1.04B fell 26% Y/Y; sales and trading, excluding debit valuation adjustment losses of $90M, fell 13% to $3.6B.
    1. Equities down 22% to $1.2B.
    2. FICC down 8% to $2.4B.
    • Q1 net interest income of $12.4B slipped from $12.5B in Q4 and rose from $11.8B a year ago.
    • Q1 net charge-off ratio of 0.43% increased from 0.39% in Q4 and 0.40% in Q1 2018.
    • Return on average tangible common shareholders' equity of 16.01% slips from 16.29% in Q4 and increases from 15.26% a year ago.
    • Bank of America shares fall 0.1% in premarket trading.
    • Conference call at 8:30 AM ET: 1-877-200-4456 (U.S.) or 1-785-424-1732 (international); Conference ID is 79795.
    • Previously: Bank of America beats by $0.04, misses on revenue (April 16)
    • Johnson & Johnson (JNJQ1 results: Revenues: $20,021M (+0.1%); Consumer: $3,318M (-2.4%); Pharmaceuticals: $10,244M (+4.1%); Medical Devices: $6,459M (-4.6%).
    • Net Income: $3,749M (-14.2%); EPS: $1.39 (-13.1%); Non-GAAP EPS: $2.10 (+1.9%); Non-GAAP Net Income: $5,661M (+0.5%).
    • Key Product Sales: Remicade: $1,102M (-20.6%); Simponi/Simponi Aria: $524M (+1.0%); Stelara: $1,405M (+32.4%); Darzalex: $629M (+45.5%); Xarelto: $542M (-6.3%); Zytiga: $679M (-19.6%); Imbruvica: $784M (+33.5%); Velcade: $263M (-16.0%); Invega sustennn/Xeplion/Trinza/Trevicta: $790M (+13.5%); EDURANT/rilpivirine: $211M (+0.8%); Prezista/Prezcobix/Rezolsta/Symtuza: $523M (+9.5%); Precrit/Eprex: $226M (-18.0%).
    • 2019 Guidance: Revenues: $80.4B – $81.2B (unch); Non-GAAP EPS: $8.53 – 8.63 from $8.50 – 8.65.
    • Shares are up 1% premarket
    • UnitedHealth Group (UNHQ1 results: Revenues: $60,308M (+9.3%); Premiums: $47,513M (+7.8%); Products: $8,072M (+20.4%); Services: $4,318M (+5.2%); Investment and other income: $405M (+35.9%).
    • UnitedHealthcare: $48,896M (+7.6%); Optum: $26,360M (+11.7%).
    • Net Income: $3,467M (+22.2%); EPS: $3.56 (+24.0%); Non-GAAP EPS: $3.73 (+22.7%); Non-GAAP Net Income: $3,638M (+21.2%); Quick Assets: $15,710M (+9.7%); CF Ops: $3,234M (-61.4%).
    • 2019 Guidance: GAAP EPS: $13.80 – 14.05 from $13.70 – 14.00; Non-GAAP EPS: $14.50 – 14.75 from $14.40 – 14.70; GAAP net income: $13,425M – 13,750M; Non-GAAP net income: $14,115M – 14,440M.
    • Shares are up 1% premarket.
    • The U.S. will push its allies at a meeting in Prague next month to adopt shared security and policy measures that will make it more difficult for China's Huawei to dominate 5G networks, Reuters reports.
    • The U.S. has been meeting with allies in recent months to warn them Washington believes Huawei's equipment could be used by the Chinese state to spy. Huawei has repeatedly denied the allegations.
    • Bad news for Huawei has generally been seen by investors as an opportunity for Nokia (NYSE:NOK) and Ericsson (NASDAQ:ERIC)
    • Congressional investigators have subpoenaed Deutsche Bank (NYSE:DB) as Democrats step up their probes into President Trump and his longtime lender.
    • The subpoenas from the U.S. House of Representatives Intelligence and Financial Services committees mark an escalation of Democratic-led probes into Trump's business dealings.
    • The committees also subpoenaed multiple other financial institutions, including JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC) and Citigroup (NYSE:C) as part of their investigations.

  6. Good morning PSW!

    GILD idea:  Buy Jan 2021 $60/70 BCS, sell $55 Ps for 10c credit. 

    ICPT idea:  Sell Jan 2021 $55 Ps for $9.  Buy back when the stock goes over $100.  More risky trade is also buying the Jan 2012 $90/115 BCS with those Ps for net credit of $0.40.

    BMY idea:  Sell May $50 calls and June $45 Ps for next $1.65ish.

    Peace to all!

    -Pharm


  7. Oh, and as a roll of the dice, NFLX Apr 18 $380 Cs for 3.40.  Just a few….


  8. Pharm – Any longs or spread on the BMY? 


  9. Phil…Where do you believe gold is headed over the next few months?   Best estimate.  Thanks.  


  10. BMY, you could buy the stock, and sell what I noted above.  Not really interested in the long(er) term right now (option wise).

    GLD….probably $118ish.  I have started to accumulate again, selling above the strikes.  I am in the Jan20 $125 Calls.


  11. We need boxes to ship stuff, right? So fewer cartons means fewer sales, right? So, consumer spending must be slowing, right? And, consumer spending drives the economy, right? 

    So, markets should be worried, right? 

    Silly me. 

    "Box shipments were down a surprising 3.0% y/y (on both an actual and average-week basis) while inventories declined 47k tons vs. the typical 70k ton decrease seen over the last 10 years.


  12. Hey Pharm!  Thanks for trades.  Hope the startup is going well.

    NFLX is more fun to short, I think but could go either way violently on earnings/guidance. 

    Gold/Iflan – Been struggling forever under $1,350 and you'd need a much weaker Dollar to break higher and none in the offing with Brexit on hold now so more of the same, rang-bounce between $1,350 and $1,200 should continue.  /SI is the better bet to break higher – it's been languishing between $14 and $15 and hasn't visited $16-18 area in ages so, if you think Gold is going higher – easier to play /SI to catch up at $5,000 per $1 move – a much better percentage mover than /YG

    Cartons/Pstas – Warren Buffet thinks that's a MAJOR forward indicator of economic activity.   On the other hand, I know AMZN and others have been making efforts to conserve, notably with AMZN purposely holding multiple orders in order to send you one box instead of several – so that's a mitigating factor.  


  13. Trouble At Tanger: How You'll Know If It's Time To Sell

    Why Netflix Has A 'Game Of Thrones' Problem

    Baidu, Alibaba, And Tencent – Strange Bedfellows United By Common Foes

    • Stocks start higher, with the S&P resuming its advance within 1% of an all-time high, aided by dovish remarks by Federal Reserve officials; S&P and Dow both +0.2%, Nasdaq +0.3%.
    • Boston Fed's Eric Rosengren said the central bank does not need to adjust monetary policy at the moment, and Chicago Fed President Charles Evans said rates can stay unchanged until the fall of 2020.
    • European bourses trade higher, with Germany's DAX +0.7%, U.K.'s FTSE +0.5% and France's CAC +0.2%; in Asia, Japan's Nikkei +0.2% and China's Shanghai Composite +2.4%.
    • In the U.S., health care (+0.3%) tops the early S&P 500 leaderboard following better than expected quarterly results from UnitedHealth (-1.4%) and Johnson & Johnson (+2.5%), while the materials (-0.2%) and real estate (-0.1%) sectors underperform.
    • U.S. Treasury prices are little changed, leaving the two-year yield flat at 2.39% and the 10-year yield up 2 bps to 2.57%; U.S. Dollar Index flat at 96.98.
    • WTI crude oil -0.3% to $63.20/bbl.

    Builder confidence stays strong

     

    • Uber (UBER) CEO Dara Khosrowshahi is entitled to stock options to purchase 1.75M shares if the company maintains a fully-diluted valuation of at least $120B during 90 consecutive trading days.
    • Khosrowshahi currently holds only 200K actual shares. The potential options agreement was part of his hiring package and not specifically tied to the IPO, but this detail from the IPO filing shows how maintaining the rumored $120B valuation would benefit the leader.
    • Videogame-related stocks are on watch after a Wired exclusive story on Sony's (SNE +0.9%) nex-gen PlayStation indicates that the new console won't be arriving in stores in 2019. The extended release timeframe means some videogame spending could be delayed until the console arrives.
    • Of interest to gamers, Wired's digging says the PlayStation 5 (expected name) will feature a CPU based on the third generation of AMD's Ryzen line and contains eight cores of the new 7nm Zen 2 microarchitecture. The PS5 won't be a cloud-only console and will still be backwards compatible with games for the PS4.
    • Of interest to investors, Activision Blizzard (ATVI -1.6%), Take-Two Interactive (TTWO -2.3%) and Electronics Arts (EA -3.8%) are all lower on the day, while GameStop (GME +0.9%) is showing a gain.
    • Sony (SNE +1.2%) previews the PlayStation 5 in an interview with Wired and the next-gen console will support 8K graphics, 3D audio, and is backward compatible with PlayStation 4 games.
    • The new hardware includes an eight-core CPU based on AMD's (NASDAQ:AMD) third-gen Ryzen line and a custom GPU based on AMD's Radeon Navi hardware, reiterating an earlier Digitimes report on AMD's 7nm processors and the next-gen PlayStation.
    • Sony didn't provide a release date but said it wouldn't release this year. Digitimes suggested AMD's chips would be ready by Q3 2020 for the console's H2 2020 release.
    • AMD shares are up 2.4% to $27.94.

    • Alphabet's (GOOG -0.1%)(GOOGL -0.1%) Google search and YouTube U.S. spending fundamentals started the year strong, according to OTR Global.
    • Google search spending was up 15% to 18% Y/Y in Q1 and Q2 compared to 16% to 19% in Q4.
    • YouTube video ad spend was up 24% to 27% in Q1, flat with Q4.
    • The firm cites “demand for A.I.-enabled bidding automation and inventory innovation with Responsive Ads.”
    • OTR says Amazon's (NASDAQ:AMZN) Q1 U.S. spending growth "remained robust" but the impact to Google's budgets "remains minuscule."
    • McDermott (MDR +10.4%) surges following news that Train 1 of the Cameron LNG project in Louisiana has reached the final commissioning stage.
    • This includes the introduction of pipeline feed gas into Train 1 of the liquefaction export facility, the precursor for the production of liquefied natural gas.
    • Once Train 1 is operational, it will be able to produce 4M mt/year of LNG.
    • The project includes three liquefaction trains with a projected export of 12M mt/year, or ~1.7B cf/day.
    • Cameron LNG is jointly owned by affiliates of Sempra Energy (NYSE:SRE), Total (NYSE:TOT), Mitsui and Japan LNG Investment LLC.
    • Morgan Stanley hikes its Snap (NYSE:SNAP) target by 55% from $5.50 to $8.50 citing some key trend improvements in advertising, engagement, innovation, and user base stability.
    • But the PT still implies a nearly 30% downside and the firm stays at an Underweight rating saying "we likely need even stronger fundamental results (than our new numbers) to drive material outperformance" after the 140% rally from the December low.
    • SNAP shares are down 0.3% to $11.80.
    • Containerboard and paper stocks are down on weak industry data and downgrades from Bank of America Merrill Lynch on Packaging Corp and International Paper to Neutral from Buy.
    • BAML's containerboard breakdown: "Box shipments were down a surprising 3.0% y/y (on both an actual and average-week basis) while inventories declined 47k tons vs. the typical 70k ton decrease seen over the last 10 years. We had been expecting ~1% growth based on our last survey report and have written that the industry, between maintenance and economic downtime, needs to drop inventories 400- 500k tons between February and June to get back into balance (so about 100k tons or more, per month). The data suggests producers are not being able to manage their excess inventory and production, and we now anticipate increased likelihood of another price cut during 2Q."
    • Notable decliners include International Paper (NYSE:IP-5.6%, Sonoco Products (NYSE:SON-2.7%, WestRock (NYSE:WRK-7.7%, Packaging Corp of America (NYSE:PKG-8.2%, Graphic Packaging (NYSE:GPK-3.5%, Greif (NYSE:GEF-2.9%, Domtar (NYSE:UFS-2.4%.
    • Canopy Growth (CGC +4.1%) is up on average volume in early trade on the heels of comments from Co-CEO Bruce Linton at a conference in Toronto that the company expects to generate over C$1B in sales over the next 12 months.
    • Related tickers: Tilray (TLRY +3.6%); Cronos Group (CRON +2.4%); Aurora Cannabis (ACB+2.1%)
    • Sorrento Therapeutics (SRNE +3.4%) has set up a new business unit focused on its water soluble cannabidiol (CBD) formulation technology.
    • The company says current CBD products are oil-based formulations, usually in sesame or olive oil, that can cause diarrhea in some users. The challenge to date has been the ability to achieve comparable concentrations considering the lipophilic (dissolving efficiently in fats) properties of CBD.
    • It has multiple water soluble formulations in stability studies and safety and pharmacokinetic studies in animals are in process. If bioequivalence is confirmed in animals, Sorrento plans to advance certain water-based formulations into human trials aimed at a 505(b)(2) registration pathway which allows the inclusion of data generated by third parties.
    • At present, it believes it can achieve CBD concentrates of 5 – 10% (50 – 100 mg/mL) for consumer products.
    • Good news out of Macau was delivered this morning after data was releases by the Gaming Inspection and Coordination Bureau.
    • The mix of mass-market revenue topped VIP revenue during Q1 to mark the first time that the higher-margin business accounted for more than 50% of all revenue.
    • The VIP business in Macau has been more sensitive to regulatory and trade news, and thus harder for analysts to model.
    • For Q1, VIP revenue in Macau was down 13% and mass market revenue rose 16%.

  14. Here a poor man's covered call!!

    M buy the Jan 21 15 call @ 9.70 and sell the May 17 25 call for 1.04. your monthly return is 10%. do that 10 times and you paid for the call and have a free ride for the rest until Jan 2021.

    You will not enjoy the div but you do not pay 24.54 either.




  15. Will we survive the next financial crisis?


  16. UnitedHealth up 1% after strong Q1

    Not any more ! ! !

    Heckuva sell off.


  17. JBSAY- my value play on this Brazilian meat processor has been doing very well. The premise remains as JBS owns 78% of Pilgrims Pride (PPC) which has been moving up. My cost basis was $4.50; sold half at $10 today so remainder is house money. 



  18. NFLX up and up since yesterday's low.  

    Well, it looks more impressive on the daily chart!  

    M/Yodi – You can do the same with the 2021 $25s @ $4 and then $12 worth of sales would have you $8 ahead whether or not M has moved up.  You know me, I like the $15s for $9.70 (almost no premium) but I'd sell the $28s for $3 to net in for $6.70 and follow the same call-selling strategy.

    UNH/Albo – Someone changed their mind on them big-time.  

    They beat and raised guidance – that doesn't bode well for those who miss down the road!  

    JBSAY/Pstas – Wow, talk about low margins – 1Bn in profit on 163Bn in sales and I assume it's reals?  Still that would be $40Bn in sales (still seems a lot for meat) and $250M in profit and the company is $13Bn, so not cheap.  They are benefiting, at the moment, from Swine Fever making African Pigs unsellable and, of course, China looking outside America for hogs and cattle.  Might not last.  Great job picking them up at $4 – THAT was reasonable. 

    If one believes that fortune favors the bold, then here is one for consideration: 

    JBS S.A. (JBSAY)- Headquartered in Sao Paulo, Brazil, JBS is the largest meat processor in the world. 150 facilities worldwide process beef, chicken, pork plus by products from processing (leather, cosmetics, etc.) . The company has 150 plants around the globe and they own several US brands- Swift; Pilgrims Pride.

    JBS got its nose bloodied when the Batista's got nailed for bribery. They spread a lot of money around to Brazilian pols. They walked away with a financial fine after helping to catch the Brazilian president's hand in the cookie jar. Brazil’s sordid tale of beef and bribes 

    The Batista family still maintains control (42%)so the foxes still own the hen house. 

    Stock has traded down lately probably due to disruption from the Brazilian truckers strike. Brazil’s Temer Vows to End Strike and Continue Economic Overhauls. 

    The JBS annual report reads like an extended press release with little actual data for analysis. However, what numbers that are reported indicate good revenue, cash flow and net profit  plus some debt reduction. 

    Here is the investment premise. JBS owns 78% of US based Pilgrims Pride (PPC) whose market cap is $5.2B and JBS's market cap is $6.7B. Assuming PPC is worth its stock price, JBS's share is worth $4B. So the balance of JBS can be had theoretically for $2.7B or approximately $2/share. 

    Unfortunately no options on JBS stock. Perhaps later as there has been some consideration of a US IPO. 

    I have an order in for some shares below current market to see if it comes in. Would appreciate any insights others may have.

    Very nice call! 


  19. Phil, thoughts on IBM tonight…


  20. Phil M and as well many more solid stocks. Why I like the deep ITM call is when the stock goes up you find the leap call moves very much in tune with the stock increase. If you have a much lower long call I have seen, in case of a run up in stock the short monthly caller increases actually more than the lower long call, resulting sometimes in a loss as you will have to move the short caller for a much higher price.

    I show this sample for players which do not wish to spend the money on the stock and still be in the game.

    In my armchair plays I prefer to buy the stock as the higher div. is as well a good income and on top the stock has no time limit.


  21. Phil,

    NG is plummeting like rock. I have 2 long Oct19. My base is 2.8.

    I will buy 2 more at 2.7. And I will give up at 2.69 I think. What do you think?

    Thanks


  22. BA just shot up — can't find any news….


  23. Butterfly Portfolio Review:  $165,949 is up 65.9% and up $14,605 since our 3/6 review (we reviewed early as I was off to CA) in our very low-touch portfolio.  It was a thorough review and our 5 position were looking to generate $140,000 in profit over 21 months so $6,700 in 6 weeks means we're right on track – a bit ahead actually.  

    As with this morning's post, I want to stress more portfolio planning and management this quarter as this is now the 2nd portfolio example today where a month ago, we went over every single position and went over our expectations for each position – decided if it were realistic – and then added up how much money we're supposed to make in a flat to up market.  Now all we have to do is make sure we're on track and we'll make 50% in 2019 and 50% in 2020.  This stuff shouldn't be hard if you know what you're doing!

    The Butterfly Portfolio, at 50% a year, is our worst-performing portfolio but that's because it's designed for consistency, not speed.  It's generally a very low-stress portfolio that makes 20-40% a year without much trouble and can ride out all sorts of market mayhem using very few positions that require very little attention.  

    AAPL – While it's annoying that our short calls have popped $9,900 against us, the overall position was net $45,637 on March 6th and now it's net $58,100 so that's PLENTY of gain and we didn't KNOW AAPL would pop in March – this is a conservative portfolio and it did exactly what it's supposed to do – SAFELY!  Now comes the fun part though as we can afford to get more aggressive so let's:

    • CASH the 15 June 2021 $120 calls for $83 ($124,500) 
    • Buy 25 June 2021 $180 calls for $40 ($100,000) 
    • Roll 5 April $175 calls at $26.50 ($13,250) to 10 July $200 calls at $9 ($9,000) for net $4,250
    • Roll 5 June 2021 $210 calls at $25.50 ($12,750) to 10 July $200 calls at $9 ($9,000) for net $3,750

    That puts $16,500 in our pocket and leaves us with 25 June 2021 $180 calls covered by 10 June 2021 $210 calls ($30,000 spread) and 20 July $200 calls ($30,000 spread) so we have net $60,000 to collect before we can even be in trouble on the short July $200s.  The original spread had $135,000 upside potential and was net $45,640 and our new spread is net $50,000 in the money with another $25,000 to gain at $210 but we should be able to roll the short calls much higher – giving us more ability to make money over the next two years AND we have $16,500 back in our pocket plus better downside protection (and the $180s have a much lower delta and would lose much less on a pullback).

    DIS – Also burned us on short calls and also $92.50 calls are deep in the money on a stock that's also getting a bit stretched at $130 so a similar set of moves is required:

    • CASH the 15 2020 $92.50 calls for $34.50 ($51,750) 
    • Buy 25 June 2021 $110 ($32.25)/$135 ($17.40) bull call spreads for $14.85 ($37,125)
    • Roll 15 short 2020 $110 calls at $23.50 to 15 Sept $115 calls at $17.50 for net $6 ($9,000) 
    • Roll 5 short April $115 calls at $15.15 ($7,575) to 10 Sept $115 calls at $17.50 ($17,500) for net $9,925
    • The April $115 puts will expire worthless.

    In this case, we are putting net $15,550 in our pockets and we end up with 25 June 2021 $110/135 bull call spreads fully covered by 25 short Sept $115 calls which are $15 in the money so we've flipped bearish in DIS for the moment but we have plenty to spend and the spreads pay back $62,500 at $135 so I feel good about our ability to adjust either way.  

    • MDLZ – The May calls are in the money but nothing to worry about as we are aggressive on the long side with 20 $55 calls so it's all about rolling the short calls along until they finally expire out of the money.  

    • OIH – Finally took off right after we covered a bit at the March lows.    Still, very easy to roll and we're heavily covered so no worries. 

    • WHR – On track for short puts and calls to expire worthless and we collected $5,250 against a net $10,050 position for 4 months out of 22 back in February – that's EXACTLY how a butterfly position is suppose to go!  

    Well that was easy.  Something you can do from a hut in Bora Bora – that's the idea of the Butterfly Portfolio!  


  24. IBM/JMD – Could go either way as they have so many things in motion and trade wars may have interrupted some of them.  They made $2.45 last year and now just $2.22 is expected so a low bar and this should be their low Q for the year, on the way to $14 (p/e 10).  High in the channel though, I wouldn't be surprised if they sell off a bit on anything but perfection.

    M/Yodi – Good strategy. 

    /NGV19/Kgab – I have 2 Oct at $2.78 avg so in the same boat.  At $2.73, avg would come down to $2.755 if I buy one more but I'd like to get below that so I'm hoping for $2.72 before I ad.  News above points to MDR exporting 1.7Bcf/day over time and total US storage is currently 1,200 Bcf so an additional draw of 620 Bcf/yr will cut our storage in half and that's JUST MDR's exports!  Of course there will be more production but it's very unlikely to keep up with this kind of explosion in demand so I play for the longer game.  

    Working Gas in Underground Storage Compared with Five-Year Range

    And they haven't even built the pipelines yet!  

    Does that really look like /NG should be lower than it was last April?

    Depending on your risk tolerance it's a risk/reward play.  Even if /NG goes to $2.50, that's down $1,000 per contract vs potential move back to $3 and gaining $4,000 per contract.  

    BA/John:  

    FAA panel finds Boeing 737 MAX software upgrade 'operationally suitable'

    BA up $7, that's good for 60 points on the Dow already.  


  25. QCOM flying off – can't find any news – something must have happened at trial


  26. they dropped all litigation


  27. Back to selling BA put spreads.   


  28. Batman – Really good news for QCOM ! ! !


  29. Using this big jump to cover a little stock.







  30. The CBD business is supposed to explode, but selling it online is still a mess



  31. More color:

     

    QCOM

    Qualcomm, Apple (AAPL) confirm agreement to dismiss all litigation worldwide  

    The settlement includes a payment from Apple to Qualcomm. The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement.




  32. AAPL / QCOM  Qualcomm surges 16% after the chipmaker and Apple agree to dismiss all litigation between the two companies world-wide. The settlement includes a payment from Apple to Qualcomm. According to an Apple press release, the companies have also reached a six-year license agreement, effective April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement. Qualcommand Apple have been locked in a contentious legal battle over how royalties are collected on innovations in smartphone technology. Their courtroom showdown kicked off earlier today. Apple is little changed, up 0.4% to $200. (patrick.sheridan@wsj.com)


  33. QCOM and AAPL settled.  QCOM up 22%.

    Nice for the LTP, we were aggressively bullish.  

    QCOM Short Put 2020 17-JAN 50.00 PUT [QCOM @ $64.01 $6.83] -10 4/16/2018 (276) $-6,700 $6.70 $-4.95 $-21.09     $1.75 $-1.05 $4,950 73.9% $-1,750
    QCOM Long Call 2021 15-JAN 50.00 CALL [QCOM @ $64.01 $6.83] 20 11/19/2018 (640) $21,000 $10.50 $6.05     $16.55 $5.17 $12,100 57.6% $33,100

    6-year license to supply AAPL is great for QCOM too! 

    No ill effects to AAPL either.  Nice to get this over with.  


  34. Earnings season is so exciting! 


  35. PHIL:  Now that Apple's war with QCOM is over, do you think this means that they will able to come out with a new generation 5G phone faster?  Rumors have been that they won't come out with one until 2021 since Intel seems to be late with the required modem.  QCOM makes one. The appearance of a 5G iPhone should initiate the next iPhone "super cycle" as people upgrade.


  36. 5G/John – I think 2020 but not 2019, I don't think it was ever going to be 2021 but first the phone companies need to have 5G systems – we're not there yet so what's the point of AAPL making 50M 5G phones when less than 5M people will have 5G access?   VZ, who seems to be in the lead, says 30 cities by the end of 2019 but the way they are doing it requires mini-towers, which means it will take forever to get new permits in each city (and each location within) they are rolling out to.  On the whole, it's fake 5G – just enough to call it 5G and claim leadership.  

    On the whole, it's kind of like worrying GM won't be competitive because they haven't announced a firm date on their self-driving car yet…


  37. NFLX with a nice $20 (5%) dip on earnings.  Too bad I forgot to add it to the STP (I thought I did, but I didn't):

    Submitted on 2019/04/12 at 10:25 am

    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. 

    Oh wait, spoke too soon, down to $325 and now back to $346 – MADNESS!


  38. IBM beats earnings but slight revenue miss.  As we expected, down but only $4 out of $145 so far.