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Tariffic Tuesday – Markets Bounce Back – Again

What a month this has been! 

It's all over now because Monday is a holiday and EVERYONE (who matters) is out the door early on Friday or Thursday or Wednesday for that matter and they don't come back until next Tuesday or Wednesday or, if they do – they sure aren't working much.  While Americans complain that they don't get many holidays – they certainly seem to stretch the ones they do have out quite a bit

I said we shouldn't expect much volume and yesterday's SPY volume was 60% of Friday's and I think we'll see even lower transaction numbers as the week goes on.  In other words, the whole thing is a joke – you may as well take the week off.  Our picks from yesterday morning were no joke as the Nasdaq (/NQ) Futures popped back to 7,450 this morning for a lovely $1,000 per contract gain from the long play we discussed in Monday Monring's PSW Report.  Likewise the S&P Futures (/ES) gained 10 points at 2,860 (again) and that was good for $500 per contract – not a bad way to start our trading week.  

This morning we're playing JULY Gasoline (/RBN19) Futures at $1.99 and I'll be very surprised if we're not at $2.05 by Thursday and, at $420 per penny, per contract, that could be good for $2,520 per contract – good enough to barbeque some steaks instead of hot dogs this weekend.  A stop below the $198 line limits the risk to $420.  

This weekend is the start of "Summer Driving Season" and the EIA forecasts a slight increase in consumption vs. last year, despite a 1% increase in overall fuel efficiency for the motor vehicle fleet:

For summer 2019, EIA forecasts U.S. motor gasoline consumption will average 9.54 million barrels per day (b/d), up 29,000 b/d (0.3%) compared with last summer’s level and nearly the same as the record summer average set in 2017. Highway travel is forecast to be 1.3% higher than last summer. The forecast increase in highway travel is largely because of growth in employment and population. The effect of the increase in highway travel is forecast to be partially offset by a 1.0% increase in fleet-wide vehicle fuel efficiency.

Last summer, in late May, Gasoline Futures peaked out at $2.25 and stayed between $2 and $2.15 for the rest of the summer so we like to jump in at $2 with tight stops below as we should have multiple chances to make money this summer – isn't that a nice, simple trading premise?  It's the same premise we had on May 7th (in the PSW Morning Report), when we went in at $1.92 and cashed out Thursday at $2.03 for a gain of $4,720 per contract!

In fact, we have a July spread on UGA in our Short-Term Portfolio, also from 5/7's PSW Morning Report, and that's a spread we started with a net credit that's already up over $2,000 in just a couple of weeks, so congratulations to all who played along at home!  The trade is already at our goal but just net $2,425 out of a potential $6,000 if UGA holds $32 so another $3,575 (147%) left to gain over the next 60 days if our premise holds up so – good for a new trade!

UGA Long Call 2019 19-JUL 29.00 CALL [UGA @ $32.04 $0.00] 20 5/7/2019 (59) $5,500 $2.75 $0.70 $2.75     $3.45 $0.00 $1,400 25.5% $6,900
UGA Short Call 2019 19-JUL 32.00 CALL [UGA @ $32.04 $0.00] -20 5/16/2019 (59) $-4,000 $2.00 $-0.50     $1.50 $0.00 $1,000 25.0% $-3,000
UGA Short Put 2019 19-JUL 32.00 PUT [UGA @ $32.04 $0.00] -10 5/7/2019 (59) $-2,250 $2.25 $-0.78     $1.48 $0.00 $775 34.4% $-1,475

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Part of the reason the markets are up this morning is because the Dollar, once again, has been rejected at 98 and that's because (please hold your laughter), Theresa May has a new Brexit deal!  Just look how excited the Pound is about that news – up half a point in two hours.  We don't know what the deal is yet but she's giving a speech later today and everyone is very excited – for some reason.

Meanwhile, Boeing (BA) says one of the crashes was caused by a bird and NOT their faulty design or faulty software, faulty training or (new information) faulty flight simulators.  A bird strike makes me feel so much better because there are hardly any birds in the sky so hitting one is considered an "Act of God" – and not at all something BA would have to compensate people for.  Ethiopian Arilines thinks this is nonsense, but they are foriegn and our Government could care less what they think.  

BA is up 2.5% this morning at $362 but we already put our foot down and sold the 2021 $280 puts for $21 last week (15th in our Live Member Chat Room) as it netted us in for $259 and that seemed like a stupidly low price for BA.  Of course, we don't expect to get BA for $259 as the sell-off is a bit overdone but we promised to buy 1,000 shares for $280 and collected $21,000 against $28,000 in ordinary margin and that's what we'll "win" if BA manages to not drop $80 (22%) between now and Jan 15th, 2021.  That's all there is to put selling! 

All that glitters may not be gold but Silver (/SI) will do for us at $14.35 this morning – that's a no-brainer of a long and silver contracts pay $50 per penny, per contract so don't be a hero if $14.35 doesn't hold and take the quick loss but /SI should be at least $14.60 and hopefully the Dollar comes down to help it out.  /SI is another one we always play when it's down at these levels.  

And, of course, if we're playing /SI we can also play Gold (/YG) at $1,270 though it's not as stupidly cheap as silver, they do both tend to bounce at the same time and, like silver, if it fails here, it's not worth sticking with…  Copper (/HG) is also back to our buy line at $2.72 so a very good morning for commodities trading it seems. 

The sustatined downturn in copper (caused by the trade war and slow building in the US) has been killing Freeport-McMoRan (FCX) and they are back down to $10.25 and you can sell the 2021 $10 puts for $2 to net in for $8 – so I love that as a solo trade but, since I think $10.25 is a fine price to pay for FCX as it's a $15Bn market cap for a company that made $2.9Bn last year but we'll call it $2Bn as they paid no taxes (thanks Donald!) and that's only 7.5x earnings but this year will suck and MAYBE they make $750M but it's a cyclical company – you are supposed to buy them when they are low! 

Anyway, so if we did own FCX at $10.25, we could sell the 2021 $10 calls for $2.40 and the $10 puts for $2 and that would lower our net basis to $5.85 with a nice $4.15 (71%) gain if called away at $10 so I REALLY don't mind being assigned at $10 which means we can treat the $2 we collect on the $10 puts like free money and set up the following spread:

  • Sell 20 FCX 2021 $10 puts for $2 ($2,000) 
  • Buy 20 FCX 2021 $8 calls for $3.40 ($6,800) 
  • Sell 20 FCX 2021 $12 calls for $1.70 ($3,400) 

That's net $1,400 on the $8,000 spread so the upside potential is $6,600 (471%) if FCX is at $12 or better in Jan, 2021 and the worst-case is you get assigned 2,000 shares of FCX at net $10.70 ($21,400) but then we sell 20 of the 2023 puts and calls for $4+ ($8,000) and our net becomes just $13,400 or $6.70/share so, if you don't mind owning FCX for $6.70/share (33% off) or getting paid $6,600 for not owning it – this is the trade for you!  

See how much fun options are!  

Meanwhile, we're still watching our bounce lines and, as I noted last week, they keep us from doing dumb things like chasing weak bounces and, with this low trading volume, it's mostly a watch and wait week anyway.  BA has pushed the Dow (/YM) over the Strong Bounce Line but the S&P (/ES) is still right at it's -5% line and the Nasdaq (/NQ) and the Russell (/RTY) are below theirs and BA is responsible for half the Dow's gains this morning so, like the Nigerian Air Traffic Investigators – we'll take it with a grain of salt:

  • Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong)  
  • S&P 2,860 is the 5% line and the bounce lines are 2,875 (weak) and 2,890 (strong)
  • Nasdaq 7,475 is the 5% line and the bounce lines are 7,540 (weak) and 7,605 (strong) 
  • Russell 1,550 is the 5% line and the bounce lines are 1,565 (weak) and 1,580 (strong)

 


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  1. The house didn't have a chance against this guy:

    https://thehustle.co/professor-who-beat-roulette/



  2. Good Morning!


  3. Good morning all!


  4. Phil,

    What do you think of EMN and INGR. Both are solid dividend player and low in the channel.

    Thanks


  5. VOD – Phil, wondering what you think of VOD?  It hit a 22 year low last week and cut its dividend on May 13 which tanked the stock but it still has a good yield.  Was encouraged by the announcement last week that they will partner with Telecom Italia and share tower infrastructure in Italy as I expect to see more network sharing by operators.  Thinking about a Jan  2021 15/20 BCS with a  1/2 $15 put sale for a small net debit with the stock at $16.03 seems like a reasonable bet, especially with 5G and potentially a strengthening euro at some point in the next 1 1/2 years.  


  6. Good morning! 

    I have a radio gig at 2:30 so I'm out of here by 2pm.  

    Took a quick gain on /RB and waiting to get back in as oil slipped suddenly and I figured /RB would follow, though there's really no logic to connecting the two over the short run.

    Whenever you are in /RB, you have to keep an eye on /CL as well as /DX, which also gave a bad sign as it bounced back up.

    That does make sense as who cares what May is proposing at this point?

    What volatility?  I don't see any volatility, do you?

    Big Chart  – Watch the NYSE, we can't lose that 200 dma.  SPX got rejected at the 50 dma and that's NOT GOOD. 

    Back in /RBN19 at $1.992 (didn't want to miss out).   It's about 0.02 under /RB

    Roulette/StJ – That used to be true but they've wised up now.  

    EMN/Kgab – I love these boring chemical plays.  They are caught up in the tariff mess but just a blip in the grand scheme of things and they are good for $1Bn+ a year and $70.50 is a $9.77Bn valuation, so a good entry down here.  

    • Sell 5 EMN 2021 $70 puts for $5.60 ($2,800)
    • Buy 10 EMN 2021 $65 calls for $8.75 ($8,750) 
    • Sell 10 EMN 2021 $75 calls for $3.50 ($3,500)

    That's net $2,450 on the $10,000 spread so over 300% upside potential at just $75 is a nice, conservative way to play that beats the Hell out of a 3% dividend, right?

    INGR/Kgab – Another nice, boring company but no growth here at all and not the bargain EMN is so I'm much less enthusiastic and 2.6% dividend isn't that great, half the S&P pays that.  

    VOD/Stu – They never make money so I mostly ignore them.  Not sure partnering with anyone in Italy is a benefit these days – that country is Europe's Venezuela.  For $44Bn they lost $1.7Bn last June and Sept (break even last two Qs) and lost $6.3Bn in 2017.  You know me – I'd much rather take my chances with FTR – you can buy that whole company for $200M and they have $8.5Bn in revenues vs $44Bn for VOD.  


  7. Hi Phil – What's your take on EXPI?  Thanks!


  8. Phil for FCX, I'd like your opinion on the following. I know the rate of return is better at 12, but what about if price in 2021 is somewhere 9-11.

    FCX, why not 5/12 BCS instead of 8/12? For $3.88, you're $5.5 in the money instead of $2.3 in the money for 1.75 


  9. Thank you Phil, for EMN. But it's not 2021, just 20 dec 2019. So only 213 days to make that.


  10. AAPL/Palotay – Will they lose all their China business?  I'd say maybe half so 7% hit and, of course, AAPL was way undervalued in the first place.  If China boycotts AAPL the US may boycott Chinese phones and AAPL will net benefit and, of course, AAPL could threaten to pull out of China and that is one thing that would actually hurt China.  Foxconn is China's largest employer with 1.3M workers and it's estimated that AAPL is responsible for 4.8M jobs in China - it would be insane for China to officially mess with AAPL and Xi is no Trump.

    We rolled our AAPL $180 calls down to the $160s for $10. 

    /KCZ19 blasting higher!  

    SIG/Robert – I just don't like to over-commit the capital.  The 2021 $15s are $7.50 and the $22.50s are $4 so net $4 and they are offering upside coverage ($3.50) to the short Julys you are selling as well but the $24,000 you're not spending there can go towards diversifying into other positions, rather than waiting 4 cycles before recovering the money from short call sales (IF all goes to plan – which it often does not). 

    Keep in mind these aren't rules, they are situationally dependent based on what we think the stock will do next over the long and short term.  

    EXPI/1020 – There's a lot of guys trying to flip the real estate model but these guys are burning $5-6M/qtr with $20M in the bank so dilution is coming and, on a regular basis, they pay their employees in discounted stock – so more dilution there and they are rapidly adding agents (I know a lot about this as they tried to recruit my brother Andy).  

    According to Yahoo, now they have 61.7M shares outstanding – that's 10% a year!  

    EMN/KGab – Thanks, December, not 2021.  All the more reason to be conservative in the target!  

    FCX/JMD – It's a reasonable trade-off as you are buying $3 of intrinsic value for $2 but, as you know, I generally won't pay more than 50% of intrinsic value to roll lower so that, simply, is my cut-off on that one.  Also, as noted above, I always prefer to tie up less money early in a trade and then, if they go lower, you can roll down more cheaply and, if they never go lower – then it was a good entry.

    At $3.88, you are $5.25 in the money at $10.25 on the $5/12 spread so $1.37 ahead of the game but, at net $1,400 on 20 $8/12 spreads, my break-even is $8.70 (not worrying about the short puts) and I'm $2.25 in the money and make $1.75 more at $12 (78%) and you make $1.75 more at $12 (33%) so you're paying for and risking twice as much money to make the same $1.75.  What's better about being deeper in the money when you don't need it?


    • Lynx Equity Strategies says Apple's (AAPL +2.1%) Q3 guidance is at risk in China with citizens reading to back Huawei after the U.S. ban and iPhone demand exhaustion.
    • The firm thinks the Huawei blacklist will delay the 5G rollout in China, pushing back a potential 5G iPhone release in the region.
    • Lynx says Apple's upside guidance was due to Chinese carriers taking in iPhone inventory and pulling forward September sales. With the trade war escalation, Apple might have to cut back on sell-in to China Mobile.
    • Lynx lowers its Apple price target from $185 to $165.
    • Anglo American (OTCQX:AAUKFOTCPK:AAUKY) says diamond sales at its majority-owned De Beers unit plunged to the lowest since 2017 during the latest sales cycle.
    • De Beers – which reports on 10 sales cycles each year – says sales of rough diamonds fell 25% Y/Y to $415M in the fourth cycle of the year from $554M for the same cycle in 2018 and tumbled 29% from $581M in sales in the third cycle of 2019.
    • "Cycle four saw lower rough-diamond sales against a backdrop of macroeconomic uncertainty, and as we enter a seasonally slower period for the industry with Indian factories closing temporarily for the traditional holiday period," De Beers CEO Bruce Cleaver says.
    • Beyond Meat (NASDAQ:BYND) is down 4.2% in morning trading on high volume of over 2.5M shares.
    • By all appearances a major battle is setting up between longs and shorts on Beyond Meat, with short interest jetting up to 44% of free float per data from S3 Partners.
    • Beyond Meat priced its IPO at $25 and has traded as high as $96.78. Underwriters Goldman Sachs, JPMorgan, Credit Suisse, BAML, Jefferies and William Blair will all have their say after the quiet period ends on June 11, but Citron has already let loose with its negative opinion. It all sets up for a few volatile weeks for the next-gen protein stock.
    • Morgan Stanley estimate Ford (F -1.1%) will see gross cost savings of $1.75B this year from restructuring and recurring savings actions.
    • "We view such savings as critical to offset the headwinds of a slower top line, rising compliance/technology costs and price pressure from capacity additions in many key segments (SUVs, pickups)," notes analyst Adam Jonas.
    • "While only partially reversing previous years’ underperformance, we believe execution of cost cutting has been key to maintaining a decent full year outlook and pushing out the risk of adverse ratings agency actions," he adds.
    • In what could be a negative development for auto suppliers, Jonas says a coordinated effort by OEMs to reduce complexity of their vehicles within propulsion, infotainment, safety systems and other functions may provide the next significant opportunity to cut costs. "A pure-EV vehicle ultimately lends itself to less complex architecture and a lower BOM than an ICE, once battery costs decline on greater manufacturing scale," he observes.
    • Auto suppliers: Meritor (MTOR +2.2%), Veoneer (VNE +0.7%), BorgWarner (BWA +1.8%), Lydall (LDL +1.3%), American Axle & Manufacturing (AXL +1.3%), Dana (DAN +1.5%), Aptiv (APTV +0.5%), Johnson Controls (JCI +0.2%), Stoneridge (SRI +0.1%), Gentex (GNTX +1%), Modine Manufacturing (MOD +0.5%), Standard Motor Products (SMP -0.5%), Allison Transmission (ALSN +0.5%), Autoliv (ALV +0.4%), Lear (LEA), Adient (ADNT -0.3%), Tenneco (TEN +0.2%), Visteon (VC -1.4%), Cooper-Standard (CPS -2.3%)
    • April Existing Home Sales-0.4% to 5.190M vs. 5.350M consensus and 5.210M prior (unrevised).
    • Gogo (GOGO +1.6%) Business Aviation and ForeFlight have partnered to get GPS location information into ForeFlight's iOS app for business aviation.
    • Flight location information is usually provided on aircraft via a separate GPS system with onboard hardware and antennas, but the new partnership means ForeFlight can deliver that info via Wi-Fi using a Gogo AVANCE system or ATG 4000/5000.
    • That means aircraft don't have to be taken out of service to install new GPS equipment, and it can operate more efficiently, Gogo says.
    • Stocks rebound at the open, led by tech stocks, after the U.S. eases restrictions on Huawei, granting U.S. companies 90-day licenses to work with the Chinese firm with limitations; Dow +0.6%, S&P +0.7%, Nasdaq +0.9%.
    • Despite the absence of planned trade talks, investors are taking the news as an opportunity to buy the dip.
    • European markets also are higher, with Germany's DAX +0.9%, France's CAC +0.5% and U.K.'s FTSE +0.4%; in Asia, Japan's Nikkei -0.1% but China's Shanghai Composite +1.2%.
    • In the U.S., Home Depot (-1.1%) trades lower after beating earnings estimates but saying above-consensus FY 2020 revenue guidance does not include the recent 25% tariff hike, while Boeing (+1.3%) rises following a WSJ report that U.S. aviation authorities increasingly believe the Ethiopian Airlines crash may have been triggered by a bird strike.
    • The information technology (+1.1%), industrials (+1%) and materials (+0.8%) are the early leaders among the S&P 500 sectors, while consumer staples (flat) lags the broader market.
    • U.S. Treasury prices are little changed, with the two-year yield up a basis point to 2.23% and the 10-year yield flat at 2.42%; U.S. Dollar Index +0.2% to 98.09.
    • WTI crude oil -0.4% to $62.99/bbl.
    • Still ahead: existing home sales
    • Stein Mart (SMRT +29.4%) says it will install Amazon Hub Lockers in about 200 of its stores spread across 28 states.
    • The retailer says that during checkout customers will select an Amazon Locker at the nearest Stein Mart as their shipping address. Once their package is ready for pickup, customers will receive an e-mail along with a barcode that they’ll use to pick up their package during store hours at the self-service locker.
    • The Stein Mart lockers initiative is due to begin in June.
    • Those buying SMRT on the news may want to have a look at Kohl's. Shares are down 13% this morning after a disappointing Q1 report. The Amazon return program may not be working as hoped.
    • Source: Press Release
    • Susquehanna starts Uber (NYSE:UBER) at Neutral with a $42 price target.
    • Analyst Shyam Patil calls Uber "a once in a generation company with a massive opportunity to revolutionize transportation and logistics” but is concerned with the decelerating growth over the past several quarters.
    • Key quote: “Bookings growth has slowed from the high 50s% y/y in 1Q18 to mid 30s% y/y in 1Q19, while adjusted revenue growth has slowed even more drastically from 85% to 14% over the same period.”
    • Patil calls the recent trends surprising considering the sheer scale of the TAM.
    • Uber shares are up 0.9% pre-market to $41.97.
    • Previously: Uber gets new sideline rating (May. 21 2019)
    • Macy's (NYSE:M) is down 1.52% in premarket trading and Nordstrom (NYSE:JWN) is off 1.00%after peers J.C. Penney (NYSE:JCP) and Kohl's (NYSE:KSS) underwhelm with their Q1 earnings reports and peel off ~9% in early action. Also within the department store sector, shares of Dillard's (NYSE:DDS) are down 0.77%.
    • It's a different story with TJX Companies (NYSE:TJX), which topped estimates on both lines of its Q1 report on comparable sales growth of 5% off strong traffic. TJX also lifted its FY20 EPS guidance to bracket the consensus mark. TJX is up 1.05% and the print was strong enough that Ross Stores (NASDAQ:ROST) could get a push higher.
    • Previously: TJX beats by $0.03, beats on revenue (May 21)
    • Previously: J.C. Penney -9% after EBITDA miss (May 21)
    • Previously: Kohl's Corporation down 10% on disappointing Q1 results, lowered FY2019 EPS guidance (May 21)

    • Airbus (OTCPK:EADSY) held out the prospect of a clash over prices to counter any decision by Boeing to launch a new aircraft in the middle of the jet market, by promising a "left hook, right hook" counter-punch with two of its existing models.
    • It would defend that space with its own A330neo at the top end and the best-selling A321neo at the bottom – two models boasting new engines on older airframes.
    • Boeing says its possible all-new aircraft would be significantly more efficient than either Airbus model, but it is under pressure from airlines to develop it at the right price.
    • Previously: One pilot on board Boeing's new '797'? (May. 20 2019)
    • China Eastern Airlines (NYSE:CEA) has formally requested compensation from Boeing for the grounding of its 14 737 MAX aircraft and has delayed deliveries of future planes.
    • The carrier has 14 Boeing 737 MAX jets in its fleet, including those from subsidiary Shanghai Airlines. The aircraft have been mothballed according to aircraft maintenance standards, the People's Daily said.

    • Urban Outfitters (NASDAQ:URBN) is opening a new clothing rental business called Nuuly in an attempt to participate in the "fastest-growing areas of fashion" without discouraging people from shopping at its stores, according to The Wall Street Journal's Khadeeja Safdar.
    • The retailer expects Nuuly to add 50K monthly subscribers within a year and be on pace to have more than $50M in annual revenue.
    • Potential competitors for Urban Outfitters' new service include startup CassStle, Rent The Runway and Stitch Fix (NASDAQ:SFIX).
    • BioCryst Pharmaceuticals (NASDAQ:BCRXannounces positive results from a Phase 3 clinical trial, APeX-2, evaluating plasma killikrein inhibitor BCX7353 for the prevention of hereditary angioedema (HAE) attacks.
    • The study met the primary endpoint for both doses (110 mg and 150 mg), reducing the rate of HAE attacks by 44% compared to placebo. Patients in the 150 mg arm with a baseline attack rate of <2/month experienced a 66% reduction versus control. Patients with an attack rate of 2 or more per month experienced a 40% reduction compared to control.
    • Investors are heading for the exits because the treatment benefit appears less than Takeda's (NYSE:TAKTAKHZYRO (lanadelumab), approved in the U.S. in August 2018 and in Europe three months later. Patients receiving 150 mg – 300 mg experienced reductions in HAE attack rates of 76 – 87%.
    • Undeterred, BCRX plans to file a U.S. marketing application in Q4 followed by an application in Europe in Q1 2020.
    • Management will host a conference call this morning at 8:30 am ET to discuss the results.
    • Shares are down 49% premarket on increased volume.
    • J.C. Penney (NYSE:JCP) is on watch after posting a wide-than-anticipated Q1 loss.
    • Comparable sales fell off 5.5% during the quarter vs. -3.9% consensus. The exit from the major appliance and in-store furniture categories in Q1 had a negative impact on the comp total. Fine jewelry, children’s apparel, women’s apparel and men’s apparel were called out as the top performing divisions during the quarter.
    • Adjusted EBITDA was reported at $74M vs. $99.5M consensus and $151M a year ago.
    • J.C. Penney ended the quarter with an inventory position down 16% from a year ago.
    • Looking ahead, J.C. Penney expects to be free cash flow positive for FY19.

    • Kohl's (NYSE:KSS) reports comparable-store sales decreased 3.4% in Q1 vs. consensus of -0.1%.
    • Gross margin rate -10 bps to 36.8%.
    • SG&A expense rate grew 130 bps to 31.2%.
    • Operating margin rate squeezed 210 bps to 2.9%.
    • Merchandise inventory fell 1.2% to $3.68B.
    • The Company now expects adjusted diluted EPS to be $5.15 to $5.45, compared to its prior guidance of $5.80 to $6.15.
    • KSS -10.19% premarket.
    • Previously: Kohl's misses by $0.06, beats on revenue (May 21)
    • AutoZone (NYSE:AZO) reports U.S. same-store sales increased 3.9% in Q1 to top the consensus estimate of +3.0%.
    • Gross profit improved 10 bps to 53.6% of sales. The increase in gross margin was attributable to the impact of the sale of two businesses completed in the prior year (29 bps), partially offset by lower merchandise margins driven primarily by a shift in mix.
    • Net income was up 10.7% to $406M as a higher lower effective tax rate was a positive factor during the quarter.
    • Inventory per location rose to 688 from 658 a year ago.
    • "Our industry fundamentals remain strong and the industry data available to us shows we are improving our market share position," says CEO Bill Rhodes.
    • Shares of AZO are inactive in the premarket session.
    • Previously: AutoZone beats by $0.80, beats on revenue (May 21)
    • Home Depot (NYSE:HD) reports comparable-store sales rose 2.5% in Q1.
    • The comp sales for the U.S. stores was 3%.
    • Gross margin rate fell 30 bps to 34.2%.
    • SG&A expense rate improved 50 bps to 18.7%.
    • Operating margin rate flat at 13.6%.
    • Merchandise inventory expanded 15.5% to $15.5B.
    • Number of customer transactions increased 3.8% to 390M.
    • Store count +4 Y/Y to 2,289 for the period.
    • FY2019 Guidance: Sales: ~+3.3%; Comparable-store sales: ~+5%; Diluted EPS: $10.03 (~+3.1%).
    • Shares are up a fraction premarket.
    • Previously: Home Depot beats by $0.07, beats on revenue (May 21)
    • Morgan Stanley analysts have delivered another blow to Tesla (NASDAQ:TSLA), slashing their worse-case scenario for the stock price to just $10 (from $97) because of concerns the electric-car leader has saturated the market.
    • "Demand is at the heart of the problem," analysts led by Adam Jonas said in a note. "Tesla has grown too big relative to near-term demand, putting great strain on the fundamentals."
    • Jonas kept his main price target for the stock at $230 and also has a bull-case valuation of $391.
    • The news sent Tesla shares under $200 again, falling 2.7% ahead of the open.

    • Economic growth in China and the U.S. could be 0.2-0.3% lower on average by 2021 and 2022 if the two countries do not row back on tit-for-tat tariffs in their dispute, according to the OECD's latest Economic Outlook.
    • U.S. consumer prices will also be 0.3% higher in 2020 than they would have been without the new duties.
    • Uncertainty about the extent and duration of the trade disputes is further holding back business investment, which is forecast to grow globally at an average rate of 1.75% this year and next, down from 3.5% in 2017 and 2018.
    • There could be more fireworks today as Theresa May meets her fractious cabinet to shore up support and get her Brexit deal over the line.
    • The prime minister is reportedly considering proposing tighter customs ties with the EU to win Labour support as it would reflect at least some of the opposition party's key demands.
    • Another big Brexit speech may also be in the making.
    • Sterling -0.3% to below $1.27 for the first time since January.
    • "Fifteen years ago, everyone was talking about whether households were borrowing too much. Today everyone is talking about whether businesses are borrowing too much," Fed Chair Jerome Powell said last night at the Atlanta Fed's annual Financial Markets Conference.
    • While he cited some caution, he dismissed the comparisons, saying business borrowing is not outsized for such a long expansion, business credit is not fueled by a dramatic asset price bubble and CLO structures are much sounder than during the mortgage credit bubble.
    • Concerns may see the Fed reluctant to cut interest rates, since lower borrowing costs could prompt firms to take on more debt.
    • Australia's central bank will consider the case for lower interest rates at its June policy meeting as the country fights to go 28 years without a recession.
    • "A lower cash rate would support employment growth and bring forward the time when inflation is consistent with the target,” RBA Governor Philip Lowe said in Brisbane.
    • 2019 was supposed to be a year of global quantitative tightening, but things are drifting in the opposite direction. Australia would become the third major central bank to cut rates this year, following New Zealand and India.
    • Chevron (NYSE:CVX) says it is now offering electric vehicle charging at five of its conventional gasoline stations in California in a partnership with EVgo, which has installed fast-charging spots in a network that spans 34 U.S. states.
    • "More than a dozen EVgo fast chargers – ranging from 50 KW to 100 KW capacity – are already operational or under construction at five Chevron stations," the companies said today.
    • Oil companies are gradually increasing their interest in electric vehicle charging, led by Royal Dutch Shell with its involvement in the new Ionity charging network in Europe and recently acquiring a charging network with more than 30K chargers; BP also is dabbling in EV charging.
    • FCC Commissioner Mike O'Rielly indicates he's "inclined" to support a merger of Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS), setting up the agency's approval of the deal.
    • Along with fellow Republican panelists Brendan Carr and Chairman Ajit Pai, that gives the deal the three-vote majority that it needs to pass muster at the FCC. Sprint shares rocketed today after Pai announced he was inclined to support the merger.
    • The FCC's on day 168 of an informal 180-day timeline for deal reviews.
    • Once the FCC formalizes its support, the new hurdle is the Justice Dept. — and fresh doubts emerged today about whether a deal that shrinks the national wireless market to three players from four will get an OK there.
    • Sprint finished the day up 18.9%; that's its biggest gain in nearly three years. T-Mobile closed up 3.9%; AT&T (NYSE:Tup 1.3% and Verizon (NYSE:VZup 1.6%.

  11. Phil – What was it about EXP that Andy did not like? It looks like a modern version of the old RE office with a broker who gave you a generous split – with no franchise fee…. Thanks.


  12. EXPI/1020 – It wasn't that he didn't like it, it's that I took a look at their business model and didn't like it and not because it's bad but because that's the way the industry is heading and there are many players and they will ultimately drive down prices until everyone loses (like Uber, Lyft, et al).  There's a ton of slack in RE but they are really just saving on having 1,000 offices and substituting that by giving away better commissions so where's the big benefit for them?  

    Now, I have a kid with a business plan that wants $800,000 for the same thing except he has wisely tied himself to a mortgage lender and a venture bank so his pitch is that he will have the same cheap transactions but he'll pre-qualify a large percentage of his buyers and make that loan money and also the venture bank is going to guarantee cash payments (at appraisal ) for listed properties – which I think is nuts but he's not taking the risk, the VCs are.  We're considering helping him with the funding on that one through PSW Investments and I'd rather own 20% of that company than 0.1% of EXPI for the same $800,000.  


  13. Phil, how do you feel about shorting CMG at this price.  I have a Jan 20 BCS 620/730 that I am considering selling the long, leaving the short 730 ($73.80) and buying 780/840 BCS to cover for $18.95.  BE on this position is around CMG $850 at expiration and if CMG stays at current price or lower profit of $5,485.  I can't imagine how CMG is maintaining this price level.  If CMG does continue to head higher, you can always add more BCS to cover.


  14. I sincerely doubt you could ever have greater than overcome the 5.56% house advantage on a biased roulette wheel. On a US wheel you would need two of the 38 numbers to be completely plugged up with gum just to reduce the house edge to break even. 


  15. Phil – I'm long term bullish on ENPH, but looking for a short-term correction in price along with the overall market. I'm long 20 Call spreads Jan20 $5 ($1.9) / $7.5 ($0.97) and short 10 Jan20 $10 Puts @$3.59.

    One possibility is to sell the 20 Jan20 $5 calls and roll into 30 Jan21 $12.5 / $20 call spreads at approx $2.45. 

    If ENPH shares decline, the short Jan20 $7.5 call will lose value and I can then widen the spread by rolling the Jan21 $12.5 calls lower. Can also short puts to offset…

    If ENPH shares rise, the extra spreads will more than offset the short Jan20 $7.5 calls up to $20.

    How would you manage these in the money spreads? Thank you


  16. BDC – What's your take on OSTK ?  Byrne apparently had to sell to meet margin calls.  Is there any value there ?  Thanks.

    https://www.cryptoglobe.com/latest/2019/05/overstock-ceo-sells-shares-in-his-company-to-invest-in-blockchain-projects/

    https://twitter.com/SamAntar/status/1128731502760595456


  17. ENPH/Eric – They just popped 50% on huge revenues AND they guided higher, making $2.7M on $100M in sales is very encouraging but still $1.6Bn is a lot to pay for $10M in extrapolated earnings and, of course, 10x sales is always a stretch.  So I agree with your assessment and if you have 20 Jan $5/7.50 bull call spreads with 10 short Jan $10 puts at net about $200, the net is now $9.80/7.20 = $2.60, which is more than $2.50 so just be done with it is the best move – it's not really a roll and the short puts seem safe at 0.85 but again, it's a nice gain and you might want to wait for a pullback to sell again and, if no pullback – you can always sell the 2021 $12.50 puts for $3 to add $2.20 with a bit more risk.  

    This is a very hot stock and it would suck to turn your winner into a loser.  I'd be more comfortable taking your $5,000 (less the short puts) and going with 2021 $12.50 ($5)/20 ($2.50) bull call spreads for net $2.50 and, if you want to gamble, you can buy 25 longs and sell 15 shorts and then sell 15 July $15 calls for $1.10 ($1,650) which would net you in for $7,100 but you are only selling 60 days out of 600 so 9 more sales like that can net you $14,850 and you're not taking on a lot or risk and you'll have your extra $2,000 back by your 2nd sale.

    I'd be happy to go over these with you each cycle as it's a great trade management lesson.  If it goes up, you can easily roll the short calls along as it's not much over-coverage and, if it goes down, you can sell 10-15 Aug $12.50s (now $3) for up to $4,500 and put a tight stop on the July calls, which would be obviously lower since you feel compelled to sell the Augs so you won't be worried about your long spread if you are generating that kind of cash, right?  

    Of course, if the short calls expire worthless but you feel the stock is oversold, you can always invest in rolling the long calls lower and widening the spread.  On the whole, it's about what you said so I think you are getting the hang of these things and yes, I'd sell at least 1/2 as many puts as I intend to sell calls so maybe 10 of the 2021 $10 calls, now $2, IFF they come closer to the $3 mark on a pullback.  If not, you probably have $18,750 coming to you from the long spread anyway.  

    OSTK/Albo – They don't make money and they are flat on revenues – what's to like?  I can't believe they ever had that bullish run in the first place – another block chain hype job.  

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 1,304 1,497 1,658 1,800 1,745 1,822 1,744 1,659 1,790 +6.9%
    Operating Profit $m 15.1 10.7 -2.57 4.27 -52.6 -220 -198.8      
    Net Profit $m 84.4 8.85 2.45 12.5 -109.9 -206.1 -194.4 -94.6 -23.7  
    EPS Reported $ 3.47 0.36 0.099 0.49 -3.27 -6.83 -6.19      
    EPS Normalised $ 3.50 0.39 0.15 0.13 -3.11 -6.77 -6.19 -2.94 -0.73  
    EPS Growth % +461.9 -88.9 -60.8 -15.3            
    PE Ratio x           n/a n/a n/a n/a  
    PEG x           n/a n/a n/a n/a
    Profitability

    If anyone out there would like to give me $350M (market cap of OSTK) so I could lose $200M a year for you – just wire the cash to my account and I'll take care of it!  cool


  18. Phil – LOL


  19. Freddie and Fannie preferreds have been in nice up trends.  Both hit new highs today.

    Long FNMAH and FMCKJ.


  20. I've never been interested in OSTK


  21. Speaking of giving me $350M – We only need $100M for our MJ Hedge Fund and it's already June!  Time for me to contact people after the holiday weekend so, if you are interested (or you know someone who is), please contact Greg at Philstockworld Dot Com and let him qualify you so we can discuss.  

    Also, for those who prefer more conventional investing, our Hedge Fund will be accepting new money for Q3 but we also would like to close that by July 1st for bookkeeping reasons – also contact Greg.

    I'm watching Canopy Growth (CGC) very closely as they are now at $15.5Bn with $78M in sales and a $101M loss and they'll lose another $500M this year and $230M in 2020 so – YAY!  Yay because that's friggin' INSANE but I do like that they are ramping sales up to $1Bn but it's only a $60Bn North American Market in total and there's going to be lots of competition so they are spending way, way too much for market share.  

    Year End 31st Mar 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue C$m 0.005 0.000 2.37 12.7 39.9 77.9 155.1 242.1 775.4 +596.4%
    Operating Profit C$m -0.021 -0.069 -8.43 -3.23 -15.3 -101.5 -425.2      
    Net Profit C$m -0.021 -0.065 -9.35 -3.50 -7.52 -70.4 -411.4 -479.7 -229.8  
    EPS Reported C$ -0.021 -0.064 -0.29 -0.045 -0.063 -0.40 -2.02      
    EPS Normalised C$ -0.021 -0.064 -0.55 -0.36 -0.094 -0.43 -2.01 -1.58 -0.48  
    EPS Growth %                    
    PE Ratio x           n/a n/a n/a n/a  
    PEG x           n/a n/a n/a n/a
    Profitability

    I love it because we (New Age/PSWI) are talking to dozens of small growers, distributors and producers who actually MAKE MONEY and, because they are small, we can buy them for 10-20x earnings along with some upside incentives and, if we can put enough of them together - it's a no-brainer for a company like CGC to buy us for even 40x – as it gives them profits they simply can't produce in their model.

    Meanwhile, these little companies with a few Million in sales and a Million in profits (30% is very normal in this Biz) aren't worth CGC's time by themselves so we're aggregating little guys for them (or companies like them).  

    Take New Age, for example, we gave them $1.5M to buy equipment and helped them get leasing to stretch the money (something ordinary MJ people have a lot of trouble doing) and they were doing about $2M in sales and $600,000 in profit and we got 27.5% of the business with a clawback (if we get 200% back in 3 years) to 16.5% and we're still waiting for approval to turn the machines on (permitting process sucks as it's Fire and FDA and even Homeland Security gets involved) but we have firm orders for 1,500 liters a month at $6,000 a liter of which a good $2,500 is profit so we're looking at, just on the manufacturing side, $9M in monthly sales and $3.7M in profits – which is $44M in annual income, which will be about as much as any of these $1Bn+ public companies HOPE to make. 

    That's JUST our business in CA – the MJ Fund will be doing similar deals in many states and we can bundle it all up and sell it or go public ourselves or flip all or part to CGC and other big boys.  

    The problem for small MJ companies, even ones doing well like New Age is that, although they can see the business opportunity, cash flow is simply not there to expand and New Age is lucky because Ken controls it and his daughter is a partner so they were re-investing the profits.  Most partnership companies making $600,000 would be splitting it up among 3-10 partners and nothing is left to invest.  

    There's a unique situation in that they can't really get loans or even bank properly and that's an  opportunity for us to be nimble, as we were with New Age because, even companies that can re-invest what they have are still a very long way from putting together Millions of Dollars to buy the equipment they need to expand.  

    That's why I'm very psyched about setting up the MJ Hedge Fund – tons of opportunity down on the ground to make real returns while the Big Money is chasing all the unicorns.  


  22. Thanks, BDC.  I bought some yesterday when I read about Byrne's possible margin calls. It's up big today, but will keep a close trailing stop.

    I remember when Aubrey Mcclendon had to liquidate almost all of his CHK stock to meet margin calls.  Turned out to be a very good buying opportunity.


  23. From the Philstockworld Live Member Chat Room (sign up here):

    Oh yeah, so I got sidetracked.  I was going to say I'm watching CGC et al, not just to get excited about the fund but because the MJ ETF has been holding these things for ages and their Revenues (not earnings) have been rocketing higher so I expect some good returns off MJ BUT I'm worried that there are a lot of growers and growing, especially in Canada, is likely to have an over-supply problem this summer.  

    This is one of those cases where "it's not a bug – it's a feature" and you can make really good money on the ETF since the premiums are so huge.  I lean towards being long-term long and I'm going to make MJ the first play in our new Hemp Boca (another PSWI project) Radio Portfolio.  The base play will be:

    • Sell 5 MJ 2021 $30 puts for $6.25 ($3,125) 
    • Buy 10 MJ 2021 $25 calls for $10.50 ($10,500)
    • Sell 10 MJ 2021 $35 calls for $6 ($6,000) 

    That's net $1,375 on the $10,000 spread that's 90% ($9,000)) in the money so the upside potential is $8,625 (627%) if MJ managed to gain a buck over the next 18 months!  How's that for a first trade? Surprisingly, the net ordinary margin requirement on this is just $1,510.70 according to TOS, so it's super-efficient but likely to change if MJ has violent swings again (I think this one flew under the radar in compliance!).  

    For our Butterfly Portfolio, however, we're going to be more aggressive:

    • Sell 10 MJ 2021 $30 puts for $6.25 ($6,250) 
    • Buy 30 MJ 2021 $35 calls for $6 ($18,000) 
    • Sell 15 MJ 2021 $50 calls for $2.30 ($3,450) 
    • Sell 15 MJ July $35 calls for $1.30 ($1.950) 
    • Sell 15 MJ July $33 puts for $2.10 ($3,150) 

    That's net $3,200 on our out of the money spread, which is mainly there to make sure the short calls don't get away from us.  Otherwise, if we can sell $5,000 every quarter, we have 5 quarters left to sell for a potential $25,000 return on our $3,200 (781%) and any value in the spread will be a bonus.  

    Our bigger risk is to the downside but earnings are over and nothing catastrophic happened so I think we're good until next earnings (July) and, of course, there's always rolling and the 2021 $20 puts are $2 – so I think we have plenty of room to adjust and, of course, we can't lose on both sides and we MIGHT win in the middle.  

    Jamie Oliver (Food/Restaurants) is BK'ing his 25 UK restaurants due to rising rents etc.  I see that in the US too – rents are killing the margins for these businesses.  

    And, with that – I'm off to do the radio show


  24. Good morning!  

    /YM is a nice short below 2,850 if /ES is below 2,860 and /NQ is below 7,450 and /RTY is below 1,545.  We're pretty flat at the moment but the Dollar is at 97.84 and, if it breaks over 98 – a lot of things you buy with Dollars will collapse.  

    Soybeans (ZSN19) right on the strong retrace line but looking good:

    Gasoline (/RB) right where we started yesterday, so another chance to play.  

    API had a 5.4M barrel build after 8.6M last week.  Gasoline up 200,000 and distillates up 2.2M so any gain in /RB should be taken off the table pretty fast as these are terrible numbers but it's possible that gas station owners who got burned on Easter aren't doing their usual topping off ahead of this holiday weekend and we may get more of a draw post-holiday.  Overall though, my prediction of 2007 is playing out as the gains in fleet mileage are relentlessly chewing away at demand, which makes it very hard for oil or gasoline to get any upside traction. 

    WTI Slides Below $63 After Surprise Crude & Gasoline Builds. 

    /NG stupidly low yet again:

    Yay!

    That's up $1,500 per contract since Friday morning's call!  

    May’s Desperate Gamble on a New Brexit Referendum Falls Flat

    Big Retailers’ Sales Lag as They Gird for Increase in Tariffs.

    How robots and your smart fridge can keep you out of a nursing home.

    At all-hands meeting Jeff Bezos tells employees he’s ‘very excited’ about the auto industry.

    Jim Cramer: Any US-China trade deal will send the market into an ‘epic rebound’.

    China's Economic "Super-Weapon" Would Devastate Its Rare-Earth Exporters. 

    Nordstrom Crashes To 8 Year Lows After Slashing Guidance.  

    Stocks Bounce As Huawei Hope Trumps Home Sales Horror. 


  25. Phil,

    Based on API, do you not think we’ll get to 2.05 on /RB?


  26. Ouch!  Oil inventories were as bad as API – even worse:

    • EIA Petroleum Inventories: Crude +4.7M barrels vs. -0.6M consensus, +5.4M last week.
    • Gasoline +3.7M barrels vs. -0.8M consensus, -1.1M last week.
    • Distillates +0.8M barrels vs. -0.1M consensus, +0.1M last week.
    • Futures -1.0% to $62.5.

    /RB down to $1.9986 and /RBN19 dropped to $1.975 and we'll let it settle but I'm inclined to DD ($1.9924 on one is where I'm at) and still play for the rally into the weekend.  $1.97 brings the average to $1.982ish – that's pretty reasonable.  


  27. Keep in mind that my attitude on /RBN19 is "if not this weekend, then we still have July 4th" – so a long wait to get back if this week doesn't work!


  28. /CL down to $61.50 – we'll see if that holds.  /RB holding $1.97 so far but might just be us buying.


  29. Total insanity going on – Trump has a melt-down speech on the White House lawn after storming out of infrastructure negotiations because he tried to trade an infrastructure deal with the Dems in exchange for halting investigations.  Turns out the whole thing was staged because he had a podium set up on the WH lawn with a sign detailing his complaints about the investigations.  What a circus!  

     

     

    Sell everything and get out of the country – that's my call!  

    Trump's "spontaneous" press conference.

    And CNBC refuses to air Democratic response – GET OUT!!!

    Image result for get out animated gif


  30. Did everyone actually go?  Well it's Webinar time with /CL testing $61, that should be interesting. 

    Seriously, our government just collapsed – I'm not happy….


  31. Falling knife purchase.

    Bought some CNX.  Stock too cheap IMHO.