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Non-Farm Friday – Is America Working?

Though it may seem like we're treading water, we're actually rotating our sectors.

3 weeks into Q1 earnings that have generally been strong the "safety" sectors have fallen back out of favor and the usual suspects (Tech, Finance) are back in favor, joined by Contstruction, Media and Industrials, which have come back in favor.  With the cyclicals moving up, it's odd that materials are not and, if the rally is real – that's a sector we'll expect to see improvement in.  

To some extent, I'm worried that we are confusing increased efficiency for a good economy.  Automation and AI are driving earnings gains while sectors that actually serve the consumers like Travel,  Retail, Personal Goods, Real Estate, Utilities, Telcos – even Healthcare – are falling off because, as I noted earlier in the week, consumers have less and less disposable income.

You can have an earnings recovery without actually selling more stuff and that's what's going on now but, ultimately, you can't grow if you don't sell more stuff and Trump's Tax Cuts have done nothing to improve the buying power of the consumers that ultimately drive this economy.  Sadly, as we may see today, you can have a nice economic recovery without having to hire people these days.

Woops – there goes another couple of million jobs!  

Honeywell says their robot will unload 1,500 cases per hour, enough to replace 6 workers with just one worker overseeing 3 or 4 robots so let's say 15 $35,000 workers ($525,000) replaced by 3 $200,000 robots ($600,000) and one $60,000 superviser (though I guess the workers had a superviser too) but the robots are a once in 5 years cost and work 3 shifts a day so really you're replacing 45 workers ($1,575,000) per year with $150,000/yr in robot expenses.  See how great corporations can do while humans are being discarded?  

Related imageThat's how we're seeing all these companies, without the benefit of having more sales, dropping more and more money to the bottom line and we're only in the very early stage of this automation cycle – like the beginning of the Industrial Revolution – which led to World Wars 1 & 2! 

The industrial revolution did wonders for America in the early 1900s and, in the Roaring 20s, the stock market flew to record highs as automation brought in incredible corporate profits and workers who protested, like Sacco and Vanzetti, were quickly vilified by the Press (in their case executed), which had been co-opted by the Top 1%, who also had their own politicians in power to maintain the status quo and to utilize the military and the police to keep the workers in check while their jobs disappeared.  

That worked like a charm – until 1929, when the lack of consumer buying power finally became a problem and then the whole thing collapsed like a house of cards.  Is this time different?  The Oligarchs are back in charge and we're once again celebrating an era in which machines will make about 50% of the work-force obsolete.  It took us 15 years and a World War to recover from the Depression caused by the first Industrial Revolution – what will it take to recover from this one?

Again, this is early in the cycle, we could still have a good decade of growth before things fall apart but Honeywell is at trade shows now with this robot and those jobs will start disappearing next year as well as millions of other jobs in other industries – it's a race against time to see what breaks down first.  

Meanwhile, Corporate Profits aren't that exciting, coming in at just 2% growth with 71% of the S&P 500 reporting.  It's just that we had such low expectations that this seems like a good thing.  Also, keep in mind this is Earnings PER SHARE and, as usual, the S&P has been reducing their share count by buying back record amounts of their own stock – $806Bn in 2018 – which is 4% of the total index so 4% of the 2% growth in EPS is due to buybacks!  

This year, buybacks are looking to be well over $1Tn, which is 5% of the GDP of this entire country!  When you break it down, over 1/4 of all shares purchases in the market are just companies buying back their own stock.  By doing so, in addition to raising EPS, they create an artificial scarcity of their own shares while also boosting the apparent demand for those shares – it's a hampster wheel that just keeps on turning but God help us all if the hampster ever gets tired.  

8:30 Update:  263,000 jobs were added in April, well over the 195,000 expected and Unemployment, at 3.6%, is the lowest it's been since 1969 – just before the recession of the early 70s.  Average Hourly Earnings grew at an anemic 0.2% which is strange since you would think people would get raises if labor is tight but, again, machines are taking over.  Still, it's all good news for the stock market so the rally should continue off this news.

Have a good weekend, 

- Phil


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  1. Phil on the workers you forgot seek leave, medical, tax deductions and future retirement payments etc etc.

    So these robots work 24 hours without complains.

  2. OK, great job report. I have to say, I  believe in Trumponomics now. Bring back Stephen Moore to the Fed.

  3. And we have to keep in mind that Trump inherited a mess, so it's almost a miracle we are where we are today.

  4. Hard to imagine the Fed not wanting to raise rates if it was not for political pressure. If you don't raise rate with the economy growing at 3.2% and 3.6% unemployment, when do you? Or are we simply addicted to low rates and we'll never have what used to be normal rates again? #weareallJapan

  5. What do the UK local election results mean for Brexit?

  6. Merkel Weighs German Carbon Prices to Speed Pollution Cuts

  7. Good morning!  

    Good jobs report with low wage gains is Goldilocks for the market. 

    Robots/Yodi – True, that's why we're all eventually going to be replaced.  I bet robots are better at watching TV than we are too – what's going to be left for humans to do?

    Image result for robot artist animated gif

    Moore/StJ – So funny how he went on TV to announce he was absolutely in for the long-haul and two hours later he withdrew – they must have has something really nasty on him.

    Big Chart – RUT came closest to failing but pulled it out and now up 0.5% so all remains well into the weekend. 

    Fed/StJ – Well there's no wage inflation and no price inflation so the Fed hasn't got a good reason to raise rates just because the markets are hot and the economy is hot.  Still, as soon as they are forced to admit wages and prices are rising – they'll have to take swift action as it will already be late.

    That pig thing in China (news above) is a BIG problem.  Bigger if it starts spreading but maybe the greatest thing that could possibly happen for BYND. 

    Just a 20% retrace of the $50 run and likely it will bust over $100 to go much higher with projections that 1/4 of China's hogs may have to be destroyed.  If this spreads to other countries – could be a global catastrophe. 

    I blame Little Caesars for their bacon-wrapped pizza causing a shortage:

    Image result for bacon wrapped  pizza

  8. Wow, look at /SI go.  Good thing it didn't stop us out.

    Now I'll take that and run though with 0.02 trailing stop as that's way too much to leave to chance. 

    As we expected, sinking Dollar lifts all ships:

  9. Good Morning!

  10. /RB stopped us out but now we can play them again over the $2.025 line with tight stops below.

    And /NG is playable yet again:

    That's $2.65 on /NGV19

  11. This is really disturbing (he said while the markets pushed higher):

    In fact, money has been leaking from stock funds all year. Investors have pulled $134.2 billion from global equity mutual funds, according to a Goldman Sachs Group Inc.analysis of data on fund flows from EPFR Global. Of that, $56.4 billion has been yanked from U.S. mutual funds, a drawdown that’s been only partially offset by $16.3 billion that’s flowed into U.S. exchange-traded funds focused on equities.

    If individuals aren’t enthusiastic, who’s buying stock and pushing prices up? It’s impossible to know precisely, but one set of usual suspects is clearly doing a lot of the heavy lifting: corporations themselves. They’ve had plenty of profits in recent years, which have been boosted by federal tax cuts, and have used a chunk of them to buy back their own stock. Share repurchases rose 22 percent in the first quarter, to an estimated $270 billion, according to Bank of America Corp., easily eclipsing the amount of money withdrawn from mutual funds. That companies don’t see more opportunities to invest in their actual businesses—say, in factories and research and development—instead of shares may be a bad omen for growth, but for now it’s keeping the party going.

    A bit more drama could enter the picture soon. Senator Chuck Schumer (D-N.Y.) and his presidential candidate colleague Bernie Sanders (I-Vt.) have proposed limiting buybacks for companies that don’t meet certain obligations to employees, such as paying all workers at least $15 an hour. Such talk could actually encourage more repurchases as corporations try to get them done while they can. The “threat of populist policies in the 2020s to reduce buybacks and inequality will likely increase buybacks in 2019 as corporations rationally front-run populist policies,” Bank of America-Merrill Lynch strategists wrote recently. While it’s possible that a serious threat to buybacks could become a stumbling block for the bull market, it may be just another brick in the fabled “wall of worry” that markets climb on the way up.

  12. GILD / Phil – looks like earnings were OK / beat on EPS a bit shy on Revs.  but full year outlook Rev a bit light….  I"ve got a short term callers for may '19 at $70…. covered by long term calls.   I don't think this should blow past these numbers based on earnings so you?    

  13. GILD/Batman – I think they had a good CC with new CEO talking about building up pipeline, which is just what investors wanted to hear.  If you have May $70s, I wouldn't worry as you're still 5% away from even having to roll them and probably 10% away from trouble.

    Those are the kind of earnings that, if you are nervous, just buy more longs!  No sense in paying premium to a caller out of fear when you can still buy the GILD 2021 $65 ($9.80)/$75 ($5.80) bull call spread for $4 (and you can still sell the $55 puts for $4.30 which makes it a free $10 spread!).  

  14. Phil could you take a look at the cde short puts from the oop? I was assigned 5x the 2020 7.00 short puts over at t.d.ameritrade.I assumed we would roll out to the 2021s at some point.Any sense in keeping the shares? thanks

  15. Phil/CDE,

    like tstep2 I was also assigned the CDE shares in td ameritrade. how does this happen. is that the issue with TD ameritrade or we are just the ones who got assigned randomly?


  16. Phil – thanks for the feedback on the near term price upside….  I don't understand the '21 65 / 70 calls.  I see the 65 at 9.5 and the 70s at 7.4….  

  17. Phil / GILD – OOPS misread this is the 65 / 75 spread please disregard 

  18. CDE/Tstep – In the OOP, we had 10 short 2020 $7 puts we sold for $1.45.  I'm not sure if you are saying you got assigned all, 5x that amount or 1/2 but, either way, I assume you have shares of CDE at net $5.55 now, right?  CDE is at $3.35 so let's consider the options (and assume you have 500 shares):

    • You can cash out at $3.35 and take a $2.20 loss ($1,100) and sell 5 2021 $5 puts for $2.05 ($1,025) to hopefully get that money back but, if not, you'll have 1,000 shares for net $5, which is still 10% less than your current batch.
    • You can DD at $3.35 to avg $4.45 on 1,000 shares and sell 10 2021 $3 calls for $1.10 ($1,100) and then your net is down to $3.35, which is the current price.  If you wanted to get more aggressive (since your net is $3,350, you could also here sell 10 2021 $5 puts for $2.05 ($2,050) which brings your net down to $1,350 on the 1,000 that may be called away at $3 and the potential to be assigned another 1,000 at $5, which would put you in 2,000 for $6,350 ($3.175).

    Of course, you can take your $1,000 loss and walk away too but I think CDE is merely dealing with their acquisition of ALO, which was done for stock and diluted the EPS in addition to the costs they are incurring to get things going.  They are not a great low-cost producer like ABX so gold below $1,250 kills them and they totally suck at silver, which probably costs them $18+ to pull out of the ground so this play is totally dependent on gold going higher over time.

    Coeur Mining: Financials And Production In 4Q 2018

    Coeur Mining 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18
    Total Revenues in $ Million 159.2 185.6 149.5 159.9 214.6 163.3 170.0 148.8 143.9
    Net Income in $ Million -8.3 18.7 -11.0 -16.7 7.6 1.2 2.9 -53.0 0.5
    EBITDA $ Million 24.7 71.4 23.4 38.6 69.6 49.4 42.1 -12.3 7.9
    Profit margin % (0 if loss) 0 10.1% 0 0 3.6% 0.8% 1.7% 0 0.3%
    EPS diluted in $/share -0.06 0.10 -0.06 -0.09 0.04 0.01 0.02 -0.29 0.00
    Cash from operating activities in $ Million 25.5 55.3 29.3 29.4 94.5 12.9 -1.3 5.8 0.1
    Capital Expenditure in $ Million 29.9 24.0 37.5 29.7 45.8 42.3 41.2 39.5 17.8
    Free Cash Flow in $ Million -4.5 31.3 -8.2 -0.03 48.7 -29.5 -42.5 -33.7 -17.7
    Total Cash $ Million 162.2 210.0 250.0 236.2 192.0 159.6 123.5 104.7 115.1
    Total Debt in $ Million 176.0 176.1 244.8 411.3 411.3 414.0 419.7 429.2 458.8
    Shares outstanding (diluted) in Million 178.7 183.1 179.2 179.3 199.2 187.6 187.5 185.2 199.6

    So I'd go with option 2 and stick with a bet that can make money over time rather than option 1, which is simply trying to recoup. 

    CDE/Pat – That deep in the money, it's easy to get assigned.  Mechanically, however, if you sold the $7s for $1.45 then you are assigned at net $5.55 and you sell your shares for $3.35 and now you have a $2.20 loss and then you sell the 2021 $5 puts for $2.10 and now you have an 0.10 loss so your worst case is owning CDE for $5.10, which is 0.45 better than before you were assigned and, a year from now, you just roll that to the 2021 $3 puts and then your net is $3.30 or whatever and then 2022 $2s, etc.  Being assigned is not a big deal…

    GILD/Batman – You could do 2x the $5 spread for each short put at that price.

  19. Phil,

    What do you think of EA?


  20. Phil CDE great analyses, I do not hold any plays in CDE but the simplest way not to receive a put assignment is check your delta. If you 100% ITM you always can expect to get assigned. I never experienced assignment if the caller of the put still has to pay premium. That is part of the job if you work with options.

  21. Just fishing for some more armchair trades on T and VZ  Buy the stock and sell the July 30/32 Strangle and with VZ the Sep 57.5 straddle.

  22. Phil, on the cde trade I was assigned half the total amount of 10x 2020 7.00 puts,results =500 shares.i am not exactly sure of the net at this time I assume its close.

    I like part1 of option two of your answer.i will dd and sell covers to get even,then wait to see what cde does to improve.

    thanks again

  23. Ahh-the boost in hiring is the US Census bureau preparing for the 2020 count. Its an increase of 190K in April. Not real hiring from company's.

  24. GTAT SEC Fraud – So 5 years after the GTAT debacle, the SEC charges the former CEO with fraud and a $140K fine.  There really is no cost to being fraudulent in the US markets anymore.  This is a joke of a regulatory environment.  The IB's supporting TSLA equity raise at higher than their analyst ratings is another joke today.

  25. Another penny on /RB – Good for $500 so far – don't be greedy on a Friday – $100 trailing stops.  

    /CL at $62.50 – nice gains now.  

    EA/Kgab – I think the business is in flux and not really growth so not one I'd play but there is that interesting ESports thing going on and 2.5M people watched their Madden Bowl Game recently, which is pretty good engagement and up from like 400,000 last year.  There's a lot of TV shows that don't get 2.5M views.  So consider that a bonus to their $1.3Bn in earnings and $27Bn ($92.50) doesn't seem that crazy but "doesn't seem that crazy" isn't why I buy something.

    Assignment/Yodi – On the other hand, if I get assigned, then it's just time to roll and I didn't have to pay a a spread or fee to get out of my short put – so I usually just wait unless there's somewhere else I clearly want to be on the put side.

    T/Yodi – I like T better than VZ and T just bought TWX so content is a nice add to the steady telco biz and VZ is pumped up from sticking FTR with CA, FL and TX but that's 3 big states they won't get earnings from down the road so T remains irresistible to me at $30.63 with their $2.04 (6.5%) dividend so, as a new play on T:

    For the OOP:

    • Sell 10 T 2021 $30 puts for $3.75 ($3,750) 
    • Buy 20 T 2021 $28 calls for $4 ($8,000) 
    • Sell 20 T 2021 $35 calls for $1.15 ($2,300) 

    That's net $1,950 on the $7,000 spread so $5,050 (258%) upside potential in 20 months and only $5,500 in ordinary margin makes this a pretty efficient way to make $5,050.  

    For the LTP:

    • Buy 2,000 shares of T for $30.63 ($61,260) 
    • Sell 20 2021 $30 puts for $3.75 ($7,500) 
    • Sell 20 2021 $30 calls for $2.85 ($5,700) 

    That's net $48,060 and we get called away at $60,000 (but we'll probably roll to stay in) for an $11,940 (25%) profit plus we get 6 dividend payments for about $3 ($6,000) for another 12.5% so 37.5% over 20 months makes it a nice thing to do with all the cash we have laying around. 

    In reality, this trade uses about $35,000 of ordinary buying power so it's returning more like 50% and, in a PM account, the trade uses perhaps $12,000 of buying power – that's where it really shines.  Even if we go to cash – this is one I'd keep as I'd be thrilled to DD on T at $20 or whatever we hit in a crash.  


    Revenue $m 128,752 132,447 146,801 163,786 160,546 170,756 177,545 183,465 184,090 +5.8%
    Operating Profit $m 30,752 12,212 24,785 24,347 19,970 26,922 27,128     -2.6%
    Net Profit $m 18,418 6,442 13,345 12,976 29,450 19,370 18,804 26,186 26,813 +1.0%
    EPS Reported $ 3.42 1.24 2.37 2.10 1.49 2.74 2.58     -4.3%
    EPS Normalised $ 3.42 1.50 2.38 2.25 1.98 2.89 2.79 3.59 3.63 -3.3%
    EPS Growth % +173.8 -56.2 +58.3 -5.2 -12.3 +46.4 +26.7 +24.2 +1.09  
    PE Ratio x           10.6 11.0 8.53 8.44  
    PEG x           0.44 0.45 7.85 43.7

    Notice what's projected to happen to earnings when TWX is integrated.  $223 is quite the bargain if they hit those numbers!  

  26. Your welcome Tstep.  Keep in mind, it's not likely to be this year that they improve – unless they luck out and gold goes back over $1,300 – then the 92M ounces of gold they mine make an extra $45M, which is 1/3 of their market cap added in profits.  That's what this play is about – staying in the right place until the right time comes along.

    Census/Pirate – Wow, good catch.  That explains the low wages too.  

    The Census Bureau has been busy trying to hire around a half million temporary workers to help carry out the upcoming national head count of every person living in the U.S. The census is set to officially kick off next January.

    Door-to-door follow-up visits by census workers help make up the most expensive part of the 2020 census. The head count is expected to cost a total of $15.6 billion. But the visits have helped the agency ensure that as many residents in the U.S. as possible are counted accurately and at their usual addresses.

    GTAT/Stu – Yeah, they fooled us too!  It is insane what they get away with.   President Warren would fix that…  TSLA is a joke on many levels, Musk just said they will be worth $500Bn and no one stops or even corrects or questions that lunacy.

  27. And the markets go up and up and up and up.  Makes my job very boring….

  28. Phil I see you climbing up on my archair trades. Well I still add VZ at this point but still no fill. Filled T.

    P:S assignments cost me always 15$ so rolling is most a better option. Important with any roll is that your overall combined play improves in relation to the old position.

  29. He I see you guys are climbing on the band wagon T from my fill 30.61 to 30.70. Bad boys!!!

  30. Trying to roll my put IRM May 17 32.5 to Jul 32.5 for a credit of .85 cents. Hard to fill Company is at the bottom of the scale and pays a div of 7.7%. Running even steven on that one. Can't win the all.

  31. Phil I see you running the 30/30 Jan 21 Straddle on T A hard poker player but nothing wrong with that, trying to catch the div as long as it last. For me a bit more work on 30/32 but 7 x 1.12 plus the div is not bad after all.

  32. Funny with all the pluses today, M does not want to bloom. Phil I think you need to say a power word on this one!!!!!


    "Annaly Capital Management reported a book value of $9.67/share in the first quarter, up 3 percent compared to Q4-2018."

    NLY ask is currently $9.73. Looking to pick up more – will it trade below book value? 

  34. T/Yodi – Been playing it 15 years at the $30 line – no sense in stopping now.  

    M/Yodi – Earnings are May 15th, hopefully they don't blow it.

    Bullard just said he's open to lowering rates – remember we thought the Fed was going to look to boost the market today with all these speakers lined up.  

    We also have a Fed Meeting on Wednesday and Non-Farm Payrolls on Friday AND the month ends on Tuesday yet I'm VERY concerned because there are SIX (6) Fed speeches scheduled for Friday – that's a lot and it seems like they must be thinking they'll have something to spin with that schedule.

    • U.S. Steel (X +12.3%) bounces off YTD lows following strong Q1 results, including a 12% Y/Y increase in adjusted EBITDA to a much higher than forecast $285M; in the previous quarter, the company had guided EBITDA sharply below market estimates.
    • U.S. Steel executives said on today's earnings conference call that Q2 EBITDA likely will come in roughly the same as Q1 and that the biggest capital spending for new projects would be pushed out to 2020-21.
    • On the call, CEO David Burritt seemed to dismiss the concerns about the flood of sheet supply entering the market in coming years: "Some on this call have even said U.S. Steel's competitive position has weakened, that U.S. Steel can't compete with the recently announced capacity additions. We know the competition. We live it, and we welcome it. We don't fear it, but we respect it."
    • Other steel names also are rallying: AKS +6.4%NUE +2.8%MT +2.6%STLD +3%.
    • ETF: SLX
    • Results from new NIH-funded study, being presented at the American Urological Association Annual Meeting in Chicago, shows that e-cigarettes may not be as safe as some suggest.
    • Researchers exposed murine bladder mucosa to e-cigarette smoke from e-juice [nicotine + vehicle versus vehicle + filtered ambient air (control)] for four hours/day, five days/week for 52 weeks.
    • Although no tumors were detected in the mouse bladders, simple urothelial hyperplasia (SUH) was observed in 60% (n=18/30) of the test group compared to 6% (n=1/16) in the control arm. SUH is defined as an increased number of epithelial (lining the surface of the bladder) cells associated with inflammation in response to an irritant (i.e., e-cig smoke) that could progress to neoplasia (could be benign or cancerous). In this case, the researchers noted 5 – 8 epithelial cell layers in the bladders of the 18 SUH-positive mice compared to 3 layers in normal mice (those exposed to vehicle + air).
    • Smoking tobacco is the most significant known risk for bladder cancer.
    • Longer-term exposures studies are underway to provide a more definitive conclusion.
    • The Bitcoin (BTC-USD) rally of 2019 continues, up another 5.6% today to a new year-to-date high of $5.8K. Bitcoin is now up more than 50% for the year.
    • Some news from today includes Facebook reportedly looking to launch a cryptocurrency payments system. There's also Fundstrat technician Robert Sluymer. His charts tell him we're in the early stages of a sustained recovery for Bitcoin.
    • Sempra Energy (SRE +0.9%receives authorization from the U.S. Department of Energy to start exporting liquefied natural gas from its 13.5M mt Port Arthur, Tex., terminal to countries that do not have a free trade agreement with the U.S.
    • Energy Secretary Perry says SRE can export 1.91B cf/day of LNG from the facility.
    • The Port Arthur LNG export project is expected to include two liquefaction trains, up to three LNG storage tanks and associated facilities.
    • SRE expects to make a final investment decision on the project later this year.
    • Atlantic Equities initiates Uber (UBER) at Neutral citing a clearer path to profitability.
    • Key quote: "We forecast ’18-22 27%/34% gross bookings/adj gross profit CAGRs, driven by high-teens ride-hailing growth, rapid Eats/freight expansion and eventual easing in promotional intensity."
    • The firm starts competitor Lyft (NASDAQ:LYFT) at Underweight and a $50 PT, more skeptical of its profitability.
    • Key quote: "We forecast ’18-22 28%/49% gross bookings/adj gross profit CAGRs with our PT implying 0.85x FY20 gross bookings."
    • Lyft shares are down 1.2% to $60.78.
    • Warren Buffett's  Berkshire Hathaway (BRK.B +0.6%) gets the signing fee whether or not Occidental's (OXY +1.2%) bid for Anadarko Petroleum succeeds, CNBC reports, citing sources.
    • Buffett may have been willing to invest as much as $20B in OXY, the sources told CNBC's David Faber.
    • Related ticker: BRK.A
    • Tesla (NASDAQ:TSLA) increased its share offering size to 3.09M shares priced at $243 each, according to Bloomberg. Elon Musk is said to be interested in purchasing up to $25M worth of the shares in the offering.
    • The company also boosted the size of the 2.00% convertible senior note due 2024 issue to $1.60B.
    • The total offering size could still rise to $2.7B if underwriters exercise their options to purchase additional stock and notes.
    • SEC Form 424B5
    • Shares of Tesla are up 0.82% premarket to $246.10.
    • Citibank and Goldman Sachs hosted a "broad investor call" with Tesla (NASDAQ:TSLA) executives on Thursday after the company announced plans for a $2B capital raise.
    • Elon Musk said Tesla's vehicle, solar and energy businesses were just a backstop of value, but self-driving systems in development now will turn Tesla into a business with a half-a-trillion dollar market cap (up from $42B currently).
    • CFO Zach Kirkhorn also reiterated that Tesla aims to deliver 90K to 100K vehicles in Q2, and between 360K and 400K vehicles in 2019.

    NLY/Ati – It's a good management team, they always find a way to win.

  35. CDE vs AUY, I have 1000 AUY covered July 2019 $2.50 calls. Was thinking when they expire buy Jan 2020 10 of $1.50/2.00 BCS and sell 10 additional 2.50 calls to lower cost of BCS

  36. I think you may be overstating the effect of buybacks on EPS? I read a couple articles / blog posts by Ed Yardeni where he broke it down in some detail and i believe the conclusion he came to was that a large portion of the stock buybacks (more than half if i recall) was just offsetting stock dilution brought about by options and share based compensation. 

    I'll see if i can dig up the links…

  37. U.S. Services Gauge Falls to Lowest Since 2017

  38. AUY/Millard – You have the stock too?  So if you have the stock ($2.05) and short July $2.50 calls (0.05) there's not much to be gained by adding the BCS for 0.25 though it does pay a double at $2 but you could just sell the $2 calls for 0.55 and sell the $2 puts for 0.40 and that's 0.95 in your pocket and worst case is you DD for net $1.05 more (the $2 strike less what you sold puts and calls for) so I'd rather do that than spend money on a new spread as you get the 0.95 up front so, even if assigned more at $1.50, you're still better off than having the worthless spread.  

    Buybacks/CRS – That's just excuses to me, the dilution is something real that is happening for other reasons, what you are saying is "Sure they are reducing their share count to make profits look bigger than they really are but that's only because they already increased share count to make expenses look like less than they really are – so it all evens out."  cheeky

  39. Yodi-


    What would you look at as a fresh armchair play for IRM?  How many months out?

  40. Phil, how do you look at a particular option price that is for N days to expiration and know what that price would be if the stock price rose by X%?   For example current stock price is $10 and current call option price at 77 days to expire is $0.10.  How much would the option price change if the stock price rose to $10.50?    Is there a tool for this somewhere that lay people can use?

    • Dominion Energy (D -0.2%) says it expects to resume construction of the $7B-plus Atlantic Coast natural gas pipeline during Q3 and complete it by early 2021, despite legal and regulatory challenges.
    • "It's been a very frustrating process, but we are winding our way through it… and we're making progress," CEO Thomas Farrell said during today's earnings conference call.
    • Atlantic Coast is designed to carry 1.5B cf/day of gas from the Marcellus and Utica shale in Pennsylvania, Ohio and West Virginia to the southeastern U.S.
    • Dominion suspended construction in early December after a U.S. Court of Appeals stayed a permit from the U.S. Fish and Wildlife Service that authorized building the pipe in areas inhabited by threatened or endangered species.
    • The company also is seeking an order from the U.S. Supreme Court overturning an Appeals Court decision that invalidated the U.S. Forest Service's authorization to build the pipe across the Appalachian Trail.
    • Dominion says oral arguments in the first case will be presented on May 9, with a decision expected ~90 days later, and the second case – if the Supreme Court takes it up – would be heard in 2020, the company says so full construction would resume after that decision.
    • Kinder Morgan's (KMI +1.4%) request to waive tariffs on steel it imported to build its $1.75B Gulf Coast Express natural gas pipeline has been denied by the U.S. Department of Commerce.
    • The decision means tariffs will be imposed on roughly half the steel for the 514-mile pipeline being built to move 2B cf/day of gas from the Permian Basin.
    • KMI bought the pipe before Trump announced the tariffs in March 2018 and requested the exemption in part because it said U.S. mills could not hit the tight deadlines for the project.
    • Steel tariff expenses, while significant, generally remain a fraction of the costs of building major oil and gas pipelines.
    • During IPO roadshow presentations, Uber (UBER) execs say the company expects to reach the EBITDA margin after "competitive pressures" decrease, according to The Information.
    • Management expects Uber's EBITDA loss this year to exceed last year's $1.8B loss due to subsidies for drivers and coupons for riders.
    • Last year, Uber predicted shrinking the loss to $500M.
    • On Monday, May 6, the Texas State Senate is scheduled to vote on a hemp bill that, if passed, will provide a regulatory and licensing framework for the cultivation and processing of hemp in the state [including products made from hemp like cannabidiol (CBD)]. The initiative, passed by the State House last week, will be formerly called the Texas Hemp Program.
    • Village Farms (VFF +0.7%) is bullish on the prospects for passage, saying it will be a great opportunity to leverage its large-scale greenhouse operations and 30 years of know-how as a vertically integrated grower, adding that it is the only publicly traded greenhouse produce company in Canada.
    • Beyond Meat (NASDAQ:BYND) is up 7.65% on the day and still stands about 183% over where the company's IPO was priced.
    • While the company says it's tapping into broad public awareness about personal health, animal welfare, climate change and environmental conservation – the high valuation on Beyond Meat will be a talking point when analysts begin covering the stock in about a month.
    • Warren Buffett's pledge to provide Occidental Petroleum $10B to fund its bid for Anadarko and his new position in Amazon are sure to be topics of discussion at Berkshire Hathaway's (BRK.B+1.4%) (BRK.A +1.3%) annual shareholder meeting in Omaha, NE, on Saturday. Here are other topics likely to come up:
    • Use of cash: Even with the Oxy deal (if it goes through) and new stake in Amazon, Berkshire still has a pile of cash, so investors will be looking for any clues for new investment opportunities. Its stash of cash and U.S. Treasury Bills stood at $112B at the end of 2018.
    • Stock buybacks: Quarterly earnings, to be released before the meeting, will disclose how much of Berkshire's stock Buffett and Vice Chairman Charlie Munger saw fit to repurchase in Q1. Buffet has hinted that there may be a time when Berkshire buys back as much as $100B of its shares.
    • Kraft Heinz: In February, Berkshire's investment in the food manufacturer sank after KHC took $15.4B in writedowns and disclosed an SEC probe. Buffett, who admits he overpaid for the stake, may face tough questions if he continues to back the company if there are no clear signs of a turnaround.
    • Succession: Buffett is 88 years old and Munger is 95. The most obvious successors are Ajit Jain, head of Berkshire's insurance operations, and Greg Abel, who heads its energy arm. Both were promoted to vice chairmen in January.
    • Previously: Berkshire takes stake in Amazon (May 2)
    • The total count of active drilling rigs in the U.S. stabilized in the past week, falling by 1 to 990 in the latest survey from Baker Hughes after shedding 31 rigs in the previous two weeks.
    • The oil rig count added 2 to 807 after plunging by 20 a week ago, while gas rigs fell by 3 to 183.
    • WTI crude oil +0.6% to $62.20/bbl, bouncing back a bit from yesterday's big loss.
    • With a chance at a huge follow-up weekend, the countdown is on for Avengers: Endgame (DIS+0.2%), which used Thursday night's receipts to become the No. 5 grossing film of all time.
    • The super-superhero movie reached $1.785B in global grosses, passing Jurassic World's $1.672B.
    • What's ahead on the list? Now, mostly Disney's own pictures: No. 4 is Avengers: Infinity War,with a not-shabby $2.048B; No. 3 is Star Wars: The Force Awakens, with $2.068B; No. 2 is Paramount's Titanic, with $2.188B.
    • And the all-time leader by far is Avatar, with a worldwide total of $2.788B.
    • The biggest second weekend of all time (domestic) was The Force Awakens, which drew $149.2M in its follow-up, Box Office Mojo notes. It's an open question whether Avengers: Endgame can threaten that total, though there should be a better idea of projections coming later today.

  41. Jeffl IRM I do hold at present the July 32.5 straddle. You obviously can go out further to Oct for 3.50

  42. Thx for thoughts on AUY

  43. N Days/Tangled – Well there are formulas and what-if calculators, mostly available from your broker usually and I used to play with them but then decided it's all way over-thinking things.  If a stock is $10 and a call is 0.10 with 77 days left then it should decay (if out of the money) at about 0.10/week.  If I want to know what happens if it goes up or down $1, look at the price of the $9 and $11 calls and then calculate their weekly decay and then you'll know what should happen to your calls if the stock move up or down 10% over X amount of time.  Meanwhile, you can see why I prefer to just note whether something is "on track" or "off track" – too much work otherwise…

  44. You're welcome Millard.

    Glad I took $62.50 and ran on /CL – back to $62 already.  /RB too – topped out at $2.04 and back to $2.025 again (not playable now).  

    Wow, the gators are getting smarter down here – now they trick you into coming outside by ringing your doorbell:

    Image result for alligator rings doorbell animated gif

    Reminds me of Land Shark which, for some reason, is not available on YouTube.  How ridiculous is that that a vital part of our culture is missing from the Internet?  I guess it must be a copyright thing but usually you can find something when it's that famous but I just looked A LOT and it's not available.  That's ridiculous!

    Land Shark GIF by Saturday Night Live

    i guess Laraine Newman GIF by Saturday Night Live

    land shark GIF

    That's how we roll in Florida – we just brush the sharks off….

    Florida accounted for 50% of all shark attacks in the U.S. and 24% of the world's total in 2018, according to the University of Florida International Shark Attack File (ISAF) 2018 Worldwide Shark Attack Summary.

    I don't know what they mean by an attack but Jackie and I were swimming at the beach and a shark came in right next to us chasing a fish – he was about 30 feet away from where we were standing.  Everyone got out of the water, of course, and they cleared all the beaches up and down for a good mile and didn't let us back in for two hours.  

    What struck me at the time was how silly all that advice is that they give you like "punch him in the nose" as I'm standing there like an idiot about 60 feet from the shore and I'm trudging back to the edge (keeping myself between the shark and Jackie) while he's moving way faster than I can run on dry land.  He's in his element – I'm not – case closed!

    A week later, we were back in the same water – it's Florida….  Actually, now it's disappointing when there's not a shark (which is every other time my whole life so far).

    Oh yeah, it's Cinqo de Mayo – why are we not at a happy hour?

    Have a great weekend folks,

    - Phil

  45. You too Phil!  :)

  46. “No economics textbook I know that was written in the first couple of thousand years that discussed even the possibility that you could have this sort of situation continue and have all variables stay more or less the same,”  W. Buffett

    The Oracle himself would lead you to believe he hasn't a clue… :(

  47. Yodi-

    Sorry — but this is a short straddle correct?  Selling premium expecting low volatility.  Sell the puts and calls.

  48. Buffett/1020 – I agree, this is some crazy crap going on right now. 

    Meanwhile, you guys can see why I sent out that alert on /SI yesterday:




    Dollar up half a point is doing most of the damage today:

    $14.60 on /SI is our BUYBUYBUY zone!

    It was the combination of /SI hitting resistance against the strong Dollar that was probably topping out as well.  Since there was no other reason /SI was down and since it was a very reliable base we've been using for some time – it made for an easy call.  Up almost $2,000 overall ($50/penny).

    Notice the key to my success with these calls is NOT making them unless all the conditions seem right.

    Submitted on 2019/04/23 at 10:12 am

    /SI/Buckeye – Great pickup at $14.80, can use that line as a stop once it's back over or $14.75 more realistic.  Spiking Dollar caused it so that's my favorite time to go long /SI or /YG (now $1,268.5)

    Submitted on 2019/04/12 at 7:38 am

    Speaking of things that work – got my $1,000 on /SI this morning so done with that but I'll leave /KC, which is up just $150, as I have solid long-term faith there.  I have faith in /SI too, just silly not to take a quick profit there but it's still playable long over the $15 line with very tight stops below.  Could be good for another dime ($500/contract) if the Dollar fails to hold 96.50.

    $14.89 on /SI – I'm long 2 at $14.9325

    Submitted on 2019/04/11 at 2:09 pm

    /SI hit $14.85 my 2 contracts are down $475 but still up for the day on /SI from the earlier win and I like having the low basis on 2 longs. /KCN19 struggling to take back $93 but I'm also happy with that.

    Submitted on 2019/03/28 at 2:59 pm

    Silver/Kgab – People are panicking into the Dollar and Inflation is dead so I wouldn't catch a knife on /SI and /YG but, when the Dollar gets rejected at 97 or maybe 98 – then it's a good pick-up.

    See, it's a simple, consistent premise and we only play it when things line up and, even then, we might be wrong half the time but, even if we are, keeping tight stops at a good line and letting the winners run a bit means our wins should far outweigh our losses over time.

  49. Good morning! 

    Berkshire knocked it out of the park.  Another sign this rally still has legs.

    • Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is holding its annual shareholder meeting in Omaha today.
    • Later this morning, Warren Buffett and Charlie Munger will take questions from shareholders. Watch the live stream here starting at 9:45 AM ET.
    • Berkshire Hathaway (NYSE:BRK.A) (BRK.B) Q1 operating earnings rose 5.0% to $5.55B from $5.29B a year ago. By segment:
    1. Insurance – underwriting slipped to $389M from $407M.
    2. Insurance – investment income increased to $1.24B from $1.01B.
    3. Railroad, utilities, and energy rose to $1.86B from $1.73B.
    4. Other businesses increased to $2.20B from $2.13B.
    • At March 31, 2019, insurance float (net liabilities it assumes under insurance contracts) ws ~$124B, up ~$1B since the end of 2018.
    • As of May 3, 2019, Kraft Heinz (NASDAQ:KHC) hasn't filed its 2018 Form 10-K with the SEC and it hasn't released financial statements for Q1 to Berkshire. Therefore, Berkshire doesn't have the financial information to determine its share of earnings of Kraft Heinz for Q1.
    • At March 31, 2019, the fair value of Berkshire's stake in KHC was ~$10.6B vs. ~$14.0B at Dec. 31, 2018; the carrying value of its investment was ~$13.7B at March 31, 2018 vs. ~$13.8B at the end of 2018.
    • Q1 net earnings of $21.7B compare with a loss of $1.14B a year ago; net earnings include unrealized gains of $15.1B in Q1 2019 and loss of ~$7.0B in Q1 2018.
    • Previously: Warren Buffett will have plenty to talk about at annual gathering (May 3)
    • Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) increased its stock repurchases in Q1, snapping up $1.7B of Class A and Class B shares as the stock slipped in the quarter.
    • That compares with $1.3B for all of last year.
    • Berkshire Hathaway bought back 1,258 shares of Class A common stock and 6.52M shares of Class B stock.
    • Class B shares are economically equivalent to 1/1,500 of a Class A share.
    • The conglomerate's pile of cash and U.S. Treasury bills grew to $114B in the quarter from about $112B at the end of 2018.
    • Previously: Berkshire Hathaway Q1 operating earnings rise 5%(May 4)
    • Taking a broad look at Berkshire Hathaway's (NYSE:BRK.A) (NYSE:BRK.B) equity investments,it posted $46.0B of net unrealized gains on banks, insurance, and finance investments and $31.2B on consumer products investments.
    • For equity investments in commercial, industrial, and other companies, Berkshire recorded $11.6B in net unrealized gains.
    • Fair value rose 9.8% during the quarter for its equity investments in banks, insurance, and finance, 14% for its consumer products equity investments, and 8.2% for commercial, industrial and others.
    • Previously: Berkshire Hathaway Q1 operating earnings rise 5% (May 4)
    • Boeing (NYSE:BAlimited the role of its own test pilots in the final stages of developing the flight control system for its now-grounded 737 MAX jet, departing from the company's established practice of seeking detailed input, WSJ reported earlier today.
    • Boeing test pilots and senior pilots involved in the MAX's development did not receive detailed briefings about how fast or steeply the automated MCAS system could push down a plane's nose, and were not informed that MCAS relied on a single sensor – rather than two – to verify accuracy of data about the angle of a plane's nose, according to the report.
    • The extent of pilots' lack of involvement could add to scrutiny from investigators and regulators already looking into Boeing's design and engineering practices.
    • Venture Global's planned $8.5B Plaquemines LNG export project in Louisiana received a boost today as Federal Energy Regulatory Commission staff issued a key environmental study needed to secure permitting for the project.
    • In its environmental impact statement, FERC staff concluded that construction and operation of the project would trigger some adverse environmental impacts that would be reduced to less-than-significant levels with mitigation.
    • Plaquemines would be designed to produce 20M mt/year of liquefied natural gas, equal to ~2.7B cf/day.
    • Venture Global has two other LNG export projects in Louisiana: It has made a final investment decision to build its 10M mt/year Calcasieu Pass facility, which it expects will enter service in 2022, and is developing the 24M mt/year Delta project, planned to start up in 2023.
    • Venture Global says companies looking to buy gas from its facilities include Royal Dutch Shell (NYSE:RDS.A), BP, Repsol (OTCQX:REPYF), Galp Energia (OTC:GLPEF) and Poland's PGNiG.
    • Williams Cos. (NYSE:WMB) the Federal Energy Regulatory Commission authorized the Northeast Supply Enhancement project, an expansion of its existing Transco natural gas pipeline designed to serve New York markets in time for the 2020-21 winter heating season.
    • The favorable FERC vote comes after WMB provided additional information about the end use of the gas that allowed for more analysis of downstream greenhouse gas emissions.
    • Transco estimates the project would displace 900K bbl/year of oil and that the shipper, National Grid (NYSE:NGG), plans to convert 8K customers per year from No. 2 fuel oil to natural gas as well as provide natural gas service to new development.
    • New York state, where Gov. Cuomo faces pressure from environmentalists and the New York City Council to reject the project, still must approve or deny a water quality certification.
    • PG&E (NYSE:PCG) was unable to strike a deal with NextEra Energy (NYSE:NEE) and other companies with which it has power contracts in a dispute over the bankrupt utility's ability to walk away from or amend those agreements, according to documents filed in U.S. Bankruptcy Court.
    • The matter will now be decided by the judge overseeing PG&E's bankruptcy "in the coming weeks," court documents say.
    • At issue is whether the bankruptcy court or the Federal Energy Regulatory Commission has jurisdiction over the power purchase contracts, which are worth as much as $42B.
    • Most of the power contracts in question are for solar or wind resources to fulfill California's mandate to source 60% of its power from renewable energy source by 2030.
    • PG&E wants the matter resolved in bankruptcy court, while NEE and others want FERC involved.

    • Sinclair Broadcast Group (NASDAQ:SBGI) is up 14.6% postmarket, an after-hours leader among stock movers after resuming trading in the wake of a deal to acquire 21 former Fox regional sports networks and Fox College Sports.
    • Disney (NYSE:DIS) — which once hoped to get $20B for the non-YES regional sports networks, but has agreed to a deal with an enterprise value of $10.6B — is flat after hours.
    • In an 8-K filing, Sinclair notes a termination fee of $864M due to Disney if Disney terminates the deal as a result of failure of Sinclair's Diamond to consummate the deal after closing conditions are satisfied.
    • Leverage plays a part in the deal, considering Sinclair's closing market cap of $4B.
    • Either party can terminate the deal if it's not consummated on or before Feb. 3, 2020.
    • Occidental Petroleum (NYSE:OXY+2% after-hours following a Bloomberg report that Carl Icahn has built a small position in the company, apparently the latest twist in OXY's $37B takeover bid for Anadarko Petroleum (NYSE:APC) that now includes a pricey financing deal with Warren Buffett.
    • Icahn has not yet decided whether to push for any changes at the company, but he would like to see OXY's offer for Anadarko go to a shareholder vote if it is accepted, according to the report.
    • Separately, Piper Jaffray analyst Blake Fernandez thinks Chevron (NYSE:CVX) is in an "enviable position" as it relates to a potential deal for APC.
    • If the APC board takes the OXY bid and CVX, it demonstrates discipline and the company exits with a $1B breakup fee; on the other hand, most shareholders feel the APC portfolio fits nicely with CVX, and the accretion math still works if the cash component of the company's bid is increased, Fernandez believes.
    • A vigorous jobs report capped a week with plenty of economic data that indicates the U.S. economy continues to roll along, with perhaps the most-watched indicator being the Fed and how its policy-makers view the economy.
    • Most data that came in exceeded consensus estimates.
    • Fed Chair Jerome Powell described the economy strengthened more thanthe FOMC committee had expected it would since the March meeting. Stubbornly low inflation remains a worry, but not enough of one to change rates over, yet. So here's the wrap-up of what happened:
    • Stronger-than-expected: The biggie here is April nonfarm payrolls adding 263K jobs compared with 189K in March, and surpassing the +180K expected.
    1. April U.S. PMI services index came a tick in higher than consensus at 53.0.
    2. April U.S. PMI manufacturing index, at 51.6 also came in slightly better than the consensus, 52.4.
    3. ADP saw 275K jobs added in April, convincingly stronger than the 180K estimate.
    4. Consumer confidence moved ahead nicely in April at 129.2 vs. 127.1 consensus, up from 124.2 in March.
    5. March international trade in goods deficit at $71.4B came in a little narrower than the $75.9B deficit expected, and increased slightly from $70.9B in February.
    6. Factory orders in March rebounded slightly more than expected, increasing 1.9% vs. the 1.5% estimate.
    7. March pending home sales came in strong, up 3.8% vs. +0.7% expected and -1.0% in February.
    8. Q1 productivity and costs, up 3.6% outshone the +1.9% estimate and accelerated from the 1.3% increase in the prior quarter; unit labor costs unexpectedly fell by 0.9% vs. the 1.8% increase expected.
    • In-line: March PCE price index, up 0.2% M/M matched the consensus, and increased from +0% in February.
    • Depends: Wholesale inventories (advance) were flat at $668.2B compared with the expectation for a 0.3% increase.
    • Weaker-than-expected: Initial jobless claims at 230K came in higher than the 215K estimate and was unchanged from the week earlier.
    1. Both ISMs came in weaker than expected for April — ISM non-manufacturing clocked in at 55.3 vs. 57.3 estimate…
    2. And manufacturing at 52.8 fell short of the 55.0 estimate.
    3. Another manufacturing indicator, Chicago PMI, was 52.6 in April vs. the estimate of 59.0 and down from 58.7 in March.
    4. The Dallas Fed manufacturing survey came in lower than expected +2 in April vs. the +10 consensus.
    5. March construction spending unexpectedly weakened, falling 0.9% against the expectation for a +0.3% increase.
    6. The March personal income and outlays report also came in lower than estimates, with income up 0.2% M/M vs. the 0.3% consensus, consumer spending up only 0.1% M/M vs. +0.3% estimate, and core PCE price index unchanged M/M vs. +0.1% expectation.

  50. Trump raises tariffs on China.  

  51. Ouch, Dow down 450!

  52. Trump’s Vow to Up Duties Casts Pall Over Crucial China Talks

  53. Indonesia’s Economic Growth Disappoints as Exports Slump

  54. AP source: Possible attack on US forces led to deployments